Question

3.   Central Supply purchased a new printer for $67,500. The printer is expected to operate for nine (9) years, after which it will be sold for salvage value (estimated to be $6,750).

      How much is the first year’s depreciation expense if the company uses the double-declining-balance method?

A) $15,000

B) $ 7,500

C) $18,000

D) $13,500

E) None of the above

4.   Dow Chemical Corporation plans to build a laboratory dedicated to a special project. The company will not use the laboratory after the project is finished. Under GAAP, this laboratory should be:

A) Capitalized and depreciated.

B) Expensed in the current year.

C) Depreciated and expensed.

D) Capitalized only.

E) None of the above

5.   Aiello, Inc. had the following inventory in fiscal 2016. Compute the company’s cost of goods sold for fiscal 2016 assuming the company used a) FIFO and b) LIFO methods of accounting for inventory:

Beginning Inventory, January 1, 2016: 130 units @ $15.00

Purchase 200 units @ $18.00

Purchase 50 units @ $13.50

Purchase 110 units @ $15.75

Ending Inventory, December 31, 2016: 120 units

Answer 1

3) A) First year Depreciation Expense under Double-declining balance method = $15,000