Info for Question 7:

Use these facts for the following independent situations.

Steele Inc. purchased a machine for $500,000 on January 1, Year1. The machine has a $20,000 residual value and an estimated life of 20 years. The machine is expected to produce 1,000,000 widgets over its life. Steele prepares annual financial statements at 12/31 each year.

What is the 'depreciable cost' of the machine? (This would be the same regardless of what method of depreciation is used.)

QUESTION 7 AND 8

QUESTION 6 The machine produced 80,000 widgets in Year1. What is depreciation expense for Year1 using the units-of-production method? a. $38,400 b. $80,000 OC. $28,800 O d. $40,000 O e. None of the above QUESTION 7 What is depreciation expense for Year1 using the double declining balance method? O a. $25,000 0 $96,000 OC. $100,000 d. $48,000 o e. $50,000 QUESTION 8 There are special rules in U.S. GAAP for software companies. For all otherproduct research and development, generally accepted accounting principles in the United States require firms to O a. expense all research and development costs in the period incurred O b. capitalize and amortize all research and development costs over a period no greater than 10 years O c. capitalize and amortize all research and development costs over a period no greater than 5 years O d. expense research costs and capitalize development costs to be amortized over the period they benefit O e. capitalize and amortize all research and development costs over the future expected benefit period