Multiple Choice Questions
1. Jimmy’s DVD, Inc., uses the double-declining-balance method for depreciation on its computers. Which item is not needed to compute depreciation for the first year?
a. Original cost
b. Expected useful life in years
c. Estimated residual value
d. All the above are needed.
2. Which of the following costs is reported on a company’s income statement?
a. Land
b. Accumulated depreciation
c. Depreciation expense
d. Accounts payable
3. Which of the following items is reported on the balance sheet?
a. Gain on disposal of equipment
b. Accumulated depreciation
c. Cost of goods sold
d. Net sales revenue
Use the following information to answer questions 4 through 6.
Hill Company purchased a machine for $8,600 on January 1, 2010. The machine has been depreciated using the straight-line method over a 10-year life and $600 residual value. Hill sold the machine on January 1, 2012, for $7,700.
4. What gain or loss should Hill record on the sale?
a. Gain, $1,300
b. Loss, $900
c. Gain, $300
d. Gain, $700
5. Journalize Hills sale of the machine.
6. What is straight-line depreciation for the year ended December 31, 2010, and what is the book value on December 31, 2011?
7. A company purchased mineral assets costing $840,000, with estimated residual value of $30,000, and holding approximately 300,000 tons of ore. During the first year, 48,000 tons are extracted and sold. What is the amount of depletion for the first year?
a. $114,500
b. $129,600
c. $109,400
d. Cannot be determined from the data given
8. Suppose Timely Delivery pays $64 million to buy Guaranteed Overnight. Guaranteed’s assets are valued at $74 million, and its liabilities total $16 million. How much goodwill did Timely Delivery purchase in its acquisition of Guaranteed Overnight?
a. $48 million
b. $16 million
c. $26 million
d. $6 million