Question
This question has two parts Part 1 An asset was purchased for $100,000 on January 1, Year 1 and originally estimated to have a useful
This question has two parts
Part 1
An asset was purchased for $100,000 on January 1, Year 1 and originally estimated to have a useful life of 10 years with a residual value of $10,000. (The firm uses the straight-line method to depreciate all of its assets.)
At the beginning of Year 4, it was determined that the remaining useful life of the asset was only 4 years with a residual value of $2,000.
How much is the amount of depreciation expense for Year 4 using the revised amounts?
a. $27,000
b. $36,250
c. $10,000
d. $17,750
Part 2
Assume a firm sells a depreciable asset (PP&E) that costs $100 and has accumulated depreciation of $40 for a selling price of $100 cash.
The impact of this sale on the accounting equation is to:
a. increase total assets by $100; increase total owners' equity $100
b. decrease total assets by $100; decrease owners' equity by $100
c. increase total assets by $40; increase owners' equity by $40
d. decrease total assets by $40; decrease owners' equity by $40
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