1. If a fixed asset with an original cost of $18,000 andaccumulated depreciation of $12,000 is sold for $15,000, thecompany must (Points : 2)
recognize a loss on the income statement under otherexpenses.
recognize a loss on the income statement under operatingexpenses.
recognize a gain on the income statement under otherrevenues.
Gains and losses are not to be recognized upon the sell of fixedassets.
2. If a fixed asset is sold and the book value is less than cashreceived, the company must (Points : 2)
recognize a loss on the income statement under otherexpenses.
recognize a loss on the income statement under operatingexpenses.
recognize a gain on the income statement under otherrevenues.
Gains and losses are not to be recognized upon the sell of fixedassets.
3. Depreciable cost equals (Points : 2)
cost less accumulated depreciation.
book value less residual value.
cost less residual value.
market value less residual value.
4. Goodwill is (Points : 2)
amortized similar to other intangibles.
only written down if an impairment in value occurs.
charged to expense immediately.
amortized over 40 years or its economic life, whichever isshorter.
5. Expenditures that add to the utility of fixed assets for morethan one accounting period are (Points : 2)
committed expenditures.
revenue expenditures.
current expenditures.
capital expenditures.
6. A company purchased an oil well for $25 million with a residualvalue of $500,000. It is estimated that 10 million barrels can beextracted from the well. Determine depletion expense assuming 3million barrels are extracted and sold. (Points : 2)
$7,350,000
$7,500,000
$5,000,000
$7,650,000
7. Book value is defined as (Points : 2)
current market value less residual value.
cost less residual value.
current market value less accumulated depreciation.
cost less accumulated depreciation.
8. Which of the following expenditures would NOT be included in thecost of an asset? (Points : 2)
Freight costs
Vandalism
Sales tax
Surveying fees
9. To measure depreciation, all of the following must be knownEXCEPT (Points : 2)
market value.
residual value.
historical cost.
estimated life.
10. A capital expenditure would appear on the (Points : 2)
income statement under operating expenses.
balance sheet under fixed assets.
balance sheet under current assets.
income statement under other expen
1. If a fixed asset with an original cost of $18,000 andaccumulated depreciation of $12,000 is sold for $15,000, thecompany must (Points : 2)
recognize a loss on the income statement under otherexpenses.
recognize a loss on the income statement under operatingexpenses.
recognize a gain on the income statement under otherrevenues.
Gains and losses are not to be recognized upon the sell of fixedassets.
2. If a fixed asset is sold and the book value is less than cashreceived, the company must (Points : 2)
recognize a loss on the income statement under otherexpenses.
recognize a loss on the income statement under operatingexpenses.
recognize a gain on the income statement under otherrevenues.
Gains and losses are not to be recognized upon the sell of fixedassets.
3. Depreciable cost equals (Points : 2)
cost less accumulated depreciation.
book value less residual value.
cost less residual value.
market value less residual value.
4. Goodwill is (Points : 2)
amortized similar to other intangibles.
only written down if an impairment in value occurs.
charged to expense immediately.
amortized over 40 years or its economic life, whichever isshorter.
5. Expenditures that add to the utility of fixed assets for morethan one accounting period are (Points : 2)
committed expenditures.
revenue expenditures.
current expenditures.
capital expenditures.
6. A company purchased an oil well for $25 million with a residualvalue of $500,000. It is estimated that 10 million barrels can beextracted from the well. Determine depletion expense assuming 3million barrels are extracted and sold. (Points : 2)
$7,350,000
$7,500,000
$5,000,000
$7,650,000
7. Book value is defined as (Points : 2)
current market value less residual value.
cost less residual value.
current market value less accumulated depreciation.
cost less accumulated depreciation.
8. Which of the following expenditures would NOT be included in thecost of an asset? (Points : 2)
Freight costs
Vandalism
Sales tax
Surveying fees
9. To measure depreciation, all of the following must be knownEXCEPT (Points : 2)
market value.
residual value.
historical cost.
estimated life.
10. A capital expenditure would appear on the (Points : 2)
income statement under operating expenses.
balance sheet under fixed assets.
balance sheet under current assets.
income statement under other expen
Related questions
Sale of Equipment
Equipment was acquired at the beginning of the year at a cost of $38,500. The equipment was depreciated using the double-declining-balance method based on an estimated useful life of ten years and an estimated residual value of $750.
a. What was the depreciation for the first year?
$
b. Assuming the equipment was sold at the end of year 2 for $9,480, determine the gain or loss on the sale of the equipment.
$ Loss
Feedback
Book value is the asset cost minus accumulated depreciation. In the first year, the balance in the accumulated depreciation account is zero.
Compare the book value to the sale price. If the book value is more than the sale price, the equipment was sold for a loss. If the book value is less than the sale price, the equipment was sold for a gain.
Learning Objective 3.
c. Journalize the entry to record the sale. If an amount box does not require an entry, leave it blank.
| Cash | |||
| Accumulated Depreciation-Equipment | |||
| Loss on Sale of Equipment | |||
| Equipment |
Feedback
Be sure to record the selling price of the fixed asset. If the company no longer has the fixed asset what account(s) would need to be eliminated? Was there a gain or a loss on the sale?
Kincaid Company owns equipment with a cost of $367,700 andaccumulated depreciation of $56,200 that can be sold for $274,600,less a 3% sales commission. Alternatively, Kincaid Company canlease the equipment for three years for a total of $285,700, at theend of which there is no residual value. In addition, the repair,insurance, and property tax expense that would be incurred byKincaid Company on the equipment would total $15,300 over the threeyear lease.
a. Prepare a differential analysis on February18, as to whether Kincaid Company should lease (Alternative 1) orsell (Alternative 2) the equipment. For those boxes in which youmust enter subtracted or negative numbers use a minus sign.
| Differential Analysis | |||
| Lease(Alt. 1) or Sell (Alt. 2) Equipment | |||
| February 18 | |||
| Lease Equipment (Alternative 1) | Sell Equipment (Alternative 2) | Differential Effect on Income (Alternative2) | |
| Revenues | $ | $ | $ |
| Costs | |||
| Income (Loss) | $ | $ | $ |
b. Should Kincaid Company lease (Alternative 1)or sell (Alternative 2) the machine?
