1. Which of the following would NOT be considered as part of the cost of land?
a-survey and legal fees
d-unpaid taxes on the land
2. Which would NOT be considered part of land improvements?
a-removing unwanted buildings from the land
c-in-ground sprinkler systems
3. A company has installed a piece of machinery for a total of $76,000. In its third month of operation, repairs of $1,300 had to be made on the machine. This $1,300 would be:
a-added to the cost of the machinery
b-treated as a machinery repairs expense
c-placed in a separate account to be capitalized
d-a maintenance expense
4. If an asset produces more revenue in its early years, the depreciation method best suited for this asset would be the:
c-double-declining balance method
5. A company replace an engine on a vehicle and debited the amount to repairs expense, rather than debiting the “vehicle” account. Which of the following would occur because of this error?
a-Repairs expense would be understated
b-net income would be overstated
c-the asset “vehicle” would be overstated
d-the asset “vehicle” would be understated
6. Using the straight-line depreciation, what is the annual depreciation amount for a vehicle which cost $42,000, has a salvage value of $4,000, a useful life of 4 years and 100,000 miles, driven 22,000 miles this year?
7. Using units of output, what is the annual depreciation amount for a vehicle which cost $42,000, a useful life of 4 years and 100,000 miles, driven 22,000 miles this year?
8. Using double-declining balance, calculate the first two years of depreciation expense for the following piece of equipment: Cost $435,000, salvage value of $25,000, useful life of 10 years.
a. Year 1 = $87,000; Year 2 = $69,600
b. Year 1 = $82,000; year 2 = $65,600
c. Year 1 = $80,000; Year 2 = $60,000
d. Not enough information present to answer the question
9. Which depreciation method will result in the same depreciation expense every year?
10. Which depreciation method results in depreciation expense that best matches the actual use of the asset each year?