Question 1a

A used machine with a purchase price of $54,000, requiring an overhaul costing $5,000, installation costs of $3,000, and special acquisition fees of $1,000, would have a cost basis of:

	$62,000
	$58,000

	$55,000
	$63,000

Question 1b

The method of determining depreciation that yields successive reductions in the periodic depreciation charge over the estimated life of the asset is:

	straight-line
	units-of-production

	declining-balance
	time-valuation

Question 1c

A machine with a cost of $45,000 has an estimated residual value of $5,000 and an estimated life of 5 years or 15,000 hours. What is the amount of depreciation for the second full year, using the declining-balance method at double the straight-line rate?

	$16,000
	$9,600

	$10,800
	$18,000

Question 1d

Which of the following below is an example of a capital expenditure?

	replacing an engine in a company car
	cleaning the carpet in the front room

	replacing all burned-out light bulbs in the factory
	tune-up for a company truck

Question 1e

A capital expenditure results in a debit to:

	an asset account
	a stockholders' equity account

	an expense account
	a liability account