1.Pensacola Inc. exchanged old equipment for new equipment in two exchange transactions. Each transaction has commercial substance.

	Old Equipment								Cash
	Book Value				Fair Value				Received
Equipment A	$	75,000			$	80,000			$	12,000
Equipment B	$	60,000			$	56,000			$	10,000

For Equipment B, Pensacola would record a gain/(loss) of:

Multiple Choice

• $4,000.

• ($4,000).

• ($10,000).

• None of these answer choices are correct.

2.Archie Co. purchased a framing machine for $45,000 on January 1, 2021. The machine is expected to have a four-year life, with a residual value of $5,000 at the end of four years.

Using the straight-line method, depreciation for 2021 and book value at December 31, 2021, would be:

Multiple Choice

• $10,000 and $30,000 respectively.

• $11,250 and $28,750 respectively.

• $10,000 and $35,000 respectively.

• $11,250 and $33,750 respectively.

3. Cutter Enterprises purchased equipment for $72,000 on January 1, 2021. The equipment is expected to have a five-year life and a residual value of $6,000.

Using the double-declining-balance method, depreciation for 2021 and the book value at December 31, 2021, would be:

Multiple Choice

• $26,400 and $45,600 respectively.

• $28,800 and $43,200 respectively.

• $28,800 and $37,200 respectively.

• $26,400 and $39,600 respectively.

4.Archie Co. purchased a framing machine for $45,000 on January 1, 2021. The machine is expected to have a four-year life, with a residual value of $5,000 at the end of four years.

Using the straight-line method, depreciation for 2022 and book value at December 31, 2022, would be:

Multiple Choice

• $10,000 and $20,000 respectively.

• $10,000 and $25,000 respectively.

• $11,250 and $17,500 respectively.

• $11,250 and $22,500 respectively.

5.Cutter Enterprises purchased equipment for $72,000 on January 1, 2021. The equipment is expected to have a five-year life and a residual value of $6,000.

Using the straight-line method, the book value at December 31, 2021, would be:

Multiple Choice

• $57,600.

• $51,600.

• $58,800.

• $52,800.