Question 31 (2 points)

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Machinery acquired new on January 1 at a cost of $80,000 was estimated to have a useful life of 10 years and a residual salvage value of $20,000. Straight-line depreciation was used. On January 1, following six full years of use of the machinery, management decided that the estimate of useful life had been too long and that the machinery would have to be retired after three years, that is, at the end of the ninth year of service. Under this revised estimate, the depreciation expense for the seventh year of use would be:

Question 31 options:

	$8,000.
	$10,000.
	$13,000.
	$24,000.

Question 32 (2 points)

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International standards require that goodwill:

Question 32 options:

	Be capitalized and amortized over 20 years or less.
	Be capitalized and amortized over 40 years or less.
	Be capitalized and reviewed annually and its value should be adjusted if subject to impairment.
	Be expensed immediately.

Question 33 (2 points)

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Wilbur Company purchased $10,000 of equipment on January 20, Year 1. Wilbur uses the straight-line method to depreciate the equipment. The equipment has a 5-year useful life with no salvage value. Which of the following statements is correct?

Question 33 options:

	Wilbur will record a cash inflow from operating activities of $2,000 in its Year 2 financial statements.
	Wilbur will record a cash outflow from operating activities of $2,000 in its Year 2 financial statements.
	Wilbur will record a cash outflow from investing activities of $2,000 in its Year 2 financial statements.
	Wilbur will record no cash flows related to this asset on its Year 2 statement of cash flows.

Question 34 (2 points)

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If the 150% declining balance method is being used and an asset has a useful life of 20 years. What is the accelerated depreciation rate?

Question 34 options:

	7.5%.
	10%.
	15%.
	150%.

Question 35 (2 points)

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With respect to depreciation policies, the principle of consistency means:

Question 35 options:

	A company should use the same depreciation methods in its financial statements that it uses in its income tax returns.
	A company should use the same depreciation methods as other companies in the same industry.
	A company should use the same depreciation method from year to year for a given plant asset.
	A company should use the same depreciation method in computing depreciation expense on all its assets.

Question 36 (2 points)

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Lewis Imports sold a depreciable plant asset for cash of $135,000. The accumulated depreciation amounted to $170,000, and a loss of $15,000 was recognized on the sale. Under these circumstances, the original cost of the asset must have been:

Question 36 options:

	$120,000.
	$155,000.
	$185,000.
	$320,000.

Question 37 (2 points)

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On April 30, Year 1, Tilton Products purchased machinery for $88,000. The useful life of this machinery is estimated at 8 years, with an $8,000 residual value. Tilton uses a calendar year-end for financial reporting.

Assume that in its financial statements, Tilton Products uses straight-line depreciation and the half-year convention. Depreciation expense recognized on this machinery in Year 1 and Year 2 will be:

Question 37 options:

	$7,500 in Year 1 and $11,000 in Year 2.
	$6,000 in Year 1 and $12,000 in Year 2.
	$5,000 in Year 1 and $10,000 in Year 2.
	$5,500 in Year 1 and $11,000 in Year 2.

Question 38 (2 points)

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Intangible assets:

Question 38 options:

	Lack physical properties.
	Cannot be sold.
	Have been depreciated below their estimated salvage values.
	Cannot be specifically identified.

Question 39 (2 points)

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The book value of equipment:

Question 39 options:

	Increases with the passage of time.
	Decreases with the passage of time.
	Remains the same with the passage of time.
	May increase or decrease depending upon the economy.

Question 40 (2 points)

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On April 30, Year 1, Tilton Products purchased machinery for $88,000. The useful life of this machinery is estimated at 8 years, with an $8,000 residual value. Tilton uses a calendar year-end for financial reporting.

Assume that in its financial statements, Tilton Products uses the 150%-declining-balance method and the half-year convention. Depreciation expense in Year 1 and Year 2 will be:

Question 40 options:

	$8,250 in Year 1 and $14,953 in Year 2.
	$16,500 in Year 1 and $12,964 in Year 2.
	$16,500 in Year 1 and $16,500 in Year 2.
	$15,000 in Year 1 and $11,786 in Year 2.