Q1: Renewable Energies, Inc. (REI) paid $100,000 to purchase a windmill. The windmill was expected to have an 8 year useful life and a $20,000 salvage value. At the beginning of the fifth year of operation REI changed the estimated salvage value to $28,000. Based on this information, the amount of depreciation expense on the Year 5 income statement would be

A. 10,000

B. 8,000

C. 6,000

D. 4,000

Q2: Renewable Energies, Inc. (REI) paid $100,000 to purchase a windmill. The windmill was expected to have an 8 year useful life and a $20,000 salvage value. At the beginning of the fifth year of operation REI changed the estimated salvage to $28,000. Assuming the Company uses the straight-line method, the amount of accumulated depreciation on the Year 6 balance sheet would be

A. 56,000

B. 48,000

C. 40,000

D. 60,000

Q3: Which of the following would cause net income to be overstated?

A. Overestimating the useful life of an asset

B. Overestimating the salvage value of an asset

C. Capitalizing a cost that should have been expensed

D. All of the answers would cause net income to be overstated