On January 1, 20x1, Perdrillo Company acquired a new drilling machine costing $10,000. Estimated useful life of five years or 36,000 drilling operations and estimated salvage value of $1,000.

1. REQUIRED: Encircle the one correct answer for each of the following:

Show all supporting calculations or no credit.

1. Using straight-line depreciation, 20x1 depreciation expense is:

a. $2,000 b. $7,200 c. $1,800 d. $900 e. None of these.

2. Using units-of-production depreciation and that 8,000 drilling operations were made during 20x1, depreciation expense for 20x1 is:

a. $1,750 b. $1,944 c. $2,000 d. $ 1,800 e. None of th

3. Using declining balance depreciation, depreciation expense for 20x3 is:

a. $3,600 b. $2,000 c. $1,920 d. $1,440 e. None of these.

4. The machine was sold for $2,700 cash at a time when its accumulated depreciation was $8,300. The resulting gain or loss on disposal is:

a. $300 gain b. $1,700 loss c. $1,000 gain d. $2,700 loss

e. None of these