Cross-Country Bikes is a retail bike shop that sells all types of recreational and high-end bicycles. Their accounting year runs from January 1 to December 31 and they use the accrual basis of accounting.

Q1)

Q2)

At the beginning of 2016, Cross-Country owned machinery, which it had previously purchased for $28,000. At the time it was purchased, Cross- Country estimated the useful life of the machinery to be 8 years, with no residual value. At the beginning of 2016, it presented the machinery on its balance sheet as follows: $ 28,000 Machinery, at cost Accumulated depreciation Machinery, net (10,500) $ 17,500 What amount of depreciation expense should Cross-Country recognize in 2016 and how many years of useful life will be left on the machinery at the end of 2016? 2016 Depreciation Expense Useful Life Remaining at end of 2016 A $3,500 3 years B $3,500 4 years 3 years C $10,500 D $10,500 4 years In August, Cross Country invests in a new line of manufacturing equipment that will allow it to build a specialized mountain bike. During the month of August, it incurs the following costs: purchase price of equipment, $30,000; delivery costs, $1,000; installation costs, $1,500; test-runs, $750. What should Cross-Country recognize in the asset account, Equipment, as the cost of the equipment? Equipment, cost A $30,000 B $31,000 C $32,500 D $33,250