. The cost of equipment is estimated to be $325,000. The economic life of the equipment is 10 years with a salvage value of $25,000. Using straight line method, the value of depreciation expense will be:

1. $20,000
2. $30,000
3. $40,000
4. $50,000

2. While disposing a plant asset, if the amount of cash received is greater than the book value of the asset (cost less accumulated depreciation) it will be recorded as:

1. Loss
2. Gain
3. No loss no gain
4. Tax

3. A companys net sales is amounted to be $1,250,000 during a particular period of time. The average accounts receivable of the company is estimated to be $325,000. The companys accounts receivable turnover for the period will be:

1. 7.5
2. 3.84
3. 4
4. 12.25

4. The principal amount of a note is $ 135,000 with an annual interest rate of 9%. If the maturity of the note is 90 days then the amount of interest due at the time of maturity of note will be:

1. $3037.50
2. $4200.50
3. $3000.50
4. $2100.50

True/ False (2 Questions x 1 marks each = Total 2 Marks)

1. A companys credit sale is amounted to be $520,000 during 2015. As per the management estimates, 7% credit sales will not be collected. The amount of bad debts using percent of sales method of the company will be $36,400.

2. The economic life of machinery is estimated to be 8 years. Using Double-Declining-Balance Method, the double declining balance rate will be 35%.

Short Answer (4 Marks)

On December 31^st, 2010, a company purchased a machine at a cost of $100,000. The economic life of the machine is 5 years and it is expected to produce 50,000 units during its useful life with a scrap value of $10,000. The machine produced following units during its economic life:

2011 10000 Units

2012 12000 Units

2013 12000 Units

2014 10000 Units

2015 6000 Units

Find out depreciation expense for each of the five years under Units-of-production method.

Answer:

Depreciation expense for 2011:

Depreciation expense for 2012:

Depreciation expense for 2013:

Depreciation expense for 2014:

Depreciation expense for 2015: