Q1: On January 1, Year 1, Gemstone Mining Company (GMC) paid $10,500,000 cash to purchase the rights to extract raw stone from a surface pit estimated to hold 50,000 pounds of useable material. GMC extracted 10,000 pounds of stone in Year 1, 20,000 pounds of stone in Year 2, and 25,000 pounds of stone in Year 3. The rights to the surface pit were expected to have a $500,000 salvage value at the end of Year 3. Based on this information, the amount of depletion expense shown on the Year 3 income statement is

Q2: True or False: Two companies that experience identical accounting events may still report different amounts of net income. This statement is

Q3: True or False: All other things being equal, a company using double-declining balance depreciation will show higher depreciation expense in the first year of an assets useful life than a company using straight-line depreciation. This statement is

Q4: On January 1, Year 1, both Jones Company and Smith Company purchased an identical set of office furniture. Both companies assumed a zero salvage value even though Jones Company estimated an eight year useful life while Smith expected a ten year life. All other things being equal

Multiple Choice

A. Jones will report a lower amount of net income on its Year 1 financial statements than Smith would report.

B. Jones will report a higher amount of net income on its Year 10 financial statements than Smith would report.

C. Both companies will report the same amount of total assets on their Year 10 financial statements.

D. All of the answers are true.