On March 1, 2015, Copy Line paid $102,000 for a new copy machine. It was estimated that the machine would produce 850,000 copies over the next 5 years, at which time it could be sold for $17,000. The copy machine made the following amount of copies during its life:

2015 110,000 copies

2016 168,000 copies

2017 154,000 copies

2018 143,000 copies

2019 87,500 copies

It was sold on June 1, 2019 for $18,500.

1. Assuming Copy Line uses the Double-Declining Balance method of depreciation, calculate 2018 depreciation expense:

	A.	$7,480
	B.	$9,792
	C.	$14,300
	D.	$17,300
	E.	$34,000

2. On January 1, 2015, Blue Inc. purchased a patent for $23,800. Legal fees paid in this purchase amounted to $1,200. The legal remaining life of the patent is 14 years, but Blue believes it will only help increase sales for the next 10 years.

On January 1, 2018, Blue was sued for patent infringement and had to spend $3,500 of legal fees in the successful defense of this patent. What is the book value of this patent on December 31, 2018?

	A.	$14,000
	B.	$15,000
	C.	$17,500
	D.	$18,000
	E.	$21,600

3.Erroneously treating a capital expenditure as a revenue expenditure will have what effect on the financial statements?

	A.	Assets will be overstated and Stockholders Equity will be overstated.
	B.	Assets will be understated and Retained Earnings will be understated.
	C.	Stockholders Equity will be understated and Net Income will be overstated.
	D.	Stockholders Equity will be overstated and Retained Earnings will be understated.
	E.	There will be no effect to the financial statements.

4.

Blue, Inc. incurred the following costs related to equipment purchased on January 1, 2015:

• Purchased equipment for $50,000, terms 2/10, net 30. Paid for the equipment on January 5, 2015.
• Had the equipment installed and paid the installer $3,000.
• Paid the freight bill for the truck that delivered the equipment for $500.
• Advertised a new product that will be produced by the new equipment, $1,200.
• Sales taxes paid on the equipment amounted to $4,000.
• Blue believes the machine will be useful for 5 years, at which time it will be sold for $3,000.

Assuming Blue, Inc. uses the straight-line method of depreciation, what will depreciation expense on its 2016 income statement be?

	A.	$10,700
	B.	$11,040
	C.	$11,980
	D.	$21,700
	E.	$22,080