Multiple Choice (2 points each)

1. During May 2020, a company spend $14,000 on ordinary maintenance of its delivery trucks. These maintenance costs should have been recorded as debits to Maintenance Expense but the company mistakenly capitalized these costs instead. Which of the following is true?
   1. Total Assets are overstated as of May 31, 2020 and May 2020 Net Income is overstated.
   2. Total Assets are overstated as of May 31, 2020 and May 2020 Net Income is properly stated.
   3. Total Assets are understated as of May 31, 2020 and May 2020 Net Income is understated.
   4. Both Total Assets as of May 31, 2020 and May 2020 Net Income are properly stated.

2. On May 26, 2020, Robin Company sells a piece of its manufacturing equipment for $80,000 cash. Robin had initially purchased the equipment for $200,000 in a prior period. The company had recorded $140,000 in depreciation for this piece of equipment as of the date of sale. Robin Company will record a _________ related to the sale.
   1. $80,000 gain
   2. $20,000 gain
   3. $60,000 loss
   4. $120,000 loss

Use the following information about Bueno Corporation to answer the next two questions.

On April 3, 2020, Bueno Corporation purchases 400 shares of Costco Wholesale Corporation stock for $289 per share and classifies the investment as TRADING. On April 30, 2020, Costco stock is trading at $303 per share, and on May 31, 2020, Costco stock is trading at $302 per share.

3. The Investment in Costco Wholesale will be shown on Bueno Corporations April 30, 2020 Balance Sheets for:
   1. $115,600
   2. $120,800
   3. $121,200
   4. $128,800

4. The Unrealized Gain or Unrealized Loss on this trading investment will be shown on Bueno Corporations April 2020 Income Statement for:
   1. $400 unrealized loss
   2. $5,200 unrealized loss
   3. $5,600 unrealized gain
   4. $13,200 unrealized gain

5. Trading securities are valued on the balance sheet at:

1. market value.
2. lower of cost or market.
3. cost.
4. cost, adjusted for the effects of interest.

6. BIG Corporation purchases new equipment for $2,800,000 on January 1, 2020. BIG estimates that the equipment has a $120,000 residual value and a useful life of 10 years. BIG uses the straight-line method to record depreciation. Assume that on January 1, 2022, after 2 years, BIG realizes that the equipment remaining useful life is 5 years and a residual value is $160,000. A depreciation schedule would show ________ depreciation expense for 2022.
   1. $528,000
   2. $420,800
   3. $300,571
   4. $268,000
   5. $263,000