Accounting Basics

1.) A building currently has a net book value of $650,000 after three years of straight-line depreciation totalling $150,000. The estimated residual value is $50,000. What was the building's original cost?

a) $900,000

b) $850,000

c) $800,000

d) $750,000

2.) Alexa Corporation has a calendar year end and owns equipment that was purchased for $225,000 on March 1, 2020. On December 31, 2021 after the year-end adjusting entries, the carrying amount of the asset is $155,000. Due to damage, management determines the recoverable value to be $125,000. Alexa would make the following entry related to this asset:

Dr. Depreciation Expense $30,000

Cr. Accumulated Depreciation $30,000

Dr. Loss on Impairment $30,000

Cr. Accumulated Impairment LossesEquipment $30,000

Dr. Depreciation Expense $100,000

Cr. Equipment $30,000

Dr. Loss on Impairment $100,000

Cr. Accumulated Impairment LossesEquipment $30,000