BHMH2101 Financial Accounting Reinforcement cxercise - Chapter 9(2) Part A 1. Coca-Cola's famous name printed in distinctive typeface is an example of: A. A trademark. B. A patent. C. A copyright. D. Goodwill. 2. When a depreciable asset is sold at a price equal to its book value, a journal entry would include A. A credit to the asset account for its book valuc B. A debit to accumulated depreciation C. A credit to accumulated depreciation D. A credit to cash 3. All of the following assets are amortized except: A. Patents B. Franchises C. Copyrights D. Natural resources 4. An asset which costs $18,800 and has accumulated depreciation of $6,000 is sold for $11,600. What amount of gain or loss will be recognized when the asset is sold? A. A gain of $1,200 B. A loss of $1,200 C. A loss of $7,200 D. A gain of $7,200 5. The book value of PPE assets (other than land): A. Increases with the passage of time. B. Decreases with the passage of time. C. Remains the same with the passage of time. D. May increase or decrease depending upon the economy. Part B Question 1 Prepare journal entries for the following i the company adjusts its accounts annually: (a) 1 November 20X1. Purchased machinery for $93,600 with a $7,200 residual valuc and a six year lie by paying $14,400 down and the balance with a Note Payable. (Ignore interest) (b) 31 December 20X1. Record the adjusting entry for depreciation using the straight line method to the nearest month. (c) 1 July 20X2. (i) The depreciation before the disposal; (ii) Sold the machinery for $81,600 cash; and (iii) Paid off the Note Payable. Debit Credit S S a. b. c.i c.ii c.iii Question 2 (a) James Company bought equipment for $460,000 on 22 February 20Y1. The machine had an estimated residual value of $60,000, and had estimated useful life of 10 years, or had an estimated operation output of 100,000 hours. The year-end date of the company is 31 December. Calculate the depreciation on the equipment in these two years using the following methods. 2041 20Y2 (i) Straight-line (using half-year convention) $ $ (ii) 200%-declining-balance (using full-year depreciation in the first year) $ (iii) Units-of-output method (hours of operation: 10,000 in 20Y1; 12,000 in 20Y2) (b) Solar Company purchased equipment for $27,000 on 1 July 20X1. The Company depreciated the equipment over a five-year life by the 150%-declining-balance method on monthly basis and its residual value was $3,000. Until the end of the second year at 31 December 20X2, the Company sold the equipment for $12,500. Assuming the Company adjusts its accounts annually, prepare the necessary journal entries required to update the depreciation for the second year and to dispose the said equipment