Badger Mtn Ski Resort purchases a snow making machine to be sure that they will be able to open the resort by Thanksgiving weekend each year and to fill in if natural snowfall during the season is not adequate. The machine costs $150,000, sales tax is $9,000 and Badger Mtn pays another $3,000 to get the machine installed and ready to start making snow. What is the cost on the ski equipment that should show up on the balance sheet in an equipment asset account?

a. $138,000 - the purchase price of the machine less the expenses related to purchasing and setting it up.

b. $150,000 - only the price of the equipment

c. $159,000 - the purchase price including sales tax

d. $162,000 - the purchase price and ordinary costs incurred to place the machine in service

If an asset is placed in service at a cost of $50,000, is expected to be useful for 5 years and then be sold for a residual value of $10,000. What amount of depreciation expense would be recognized each year during the five years of useful life if the company uses the straight-line method.

a. $10,000

b. $12,000

c. $5,000

d. $8,000

If an asset is placed in service at a cost of $50,000, is expected to be useful for 5 years and then be sold for a residual value of $10,000, what is the amount of that asset's depreciable base?

a. $50,000

b. $25,000

c. $40,000

d. $10,000

Which of the following is the most accurate description of the reason why depreciation entries are recorded for each fixed asset of a company?

a. To record the amount of value the asset loses in each period

b. To reduce the contra asset (accumulated depreciation) so that it will be zero at the end of the asset's life

c. To be sure the balance sheet shows an accurate value for the asset

d. To allocate the cost of an asset to the many accounting periods that will benefit from the asset

Not making depreciation entries for assets with long lives but very small cost or value is an example of what underlying principle of accounting?

a. Objectivity

b. Materiality

c. Conservativism

d. Matching