Multiple Choice (2.5 points each)

1. Mink Corporation purchases new office furniture for $7,200,000 on January 1, 2022. Mink estimates that the furniture has a $400,000 residual value and a useful life of 8 years. Mink uses the straight-line method to record depreciation. Assume that on January 1, 2026, after 4 years, Mink realizes that the machine remaining useful life is 10 years and residual value is $200,000. A depreciation schedule would show ________ depreciation expense for 2026.

a. $360,000

b. $500,000

c. $600,000

d. $700,000 e. $850,000

2. Recording a capital expenditure results in a debit to a(n):

a. asset account.

b. expense account.

c. capital account.

d. liability account.

3. On March 4, 2022, Nico Remodeling sells a piece of its equipment. Nico Remodeling had initially purchased the equipment for $620,000 in a prior period. The company had recorded $540,000 in depreciation for this piece of equipment as of the date of sale. If Nico Remodeling receives $60,000 cash when they sell the equipment, they will report a __________ on their 2022 Income Statement; if they instead receive $110,000 cash when they sell the equipment, they will report a ____________.

a. $80,000 loss; $80,000 loss.

b. $20,000 loss; $30,000 gain.

c. $20,000 gain; $30,000 loss.

d. $60,000 gain; $110,000 gain.