Question

1)A revision of an estimate which extends the asset's useful life:
A.decreases depreciation expense and increases owners' equity
B.requires restatement of prior years' financial statements
C.increases depreciation expense and decreases owners' equity
D.is ignored until the last year of the asset's life

2)Treating a capital expenditure as an immediate expense:
A.understates expenses and understates assets
B.overstates assets and overstates owner's equity
C.understates expenses and overstates owners' equity
D.overstates expenses and understates net income

3)Which of the following would not be included in the Machinery account?
A.cost of insurance while the machinery is in transit
B.cost of transporting the machinery to its setup location
C.cost of a maintenance insurance plan after the machinery is up and running
D.cost of installing the machinery

4) Stout Corp. sold some fully amortized equipment for $2,600 cash. The equipment had been purchased for $26,500 and Stout Corp. had estimated the useful life at 8 years and residual value at $3,500. The journal entry to record the sale of the equipment will include a:
A.credit to Accumulated Depreciation for $23,000
B.credit to Equipment for $2,700
C.credit to Equipment for $3,500
D.debit to Loss on Sale of Equipment for $900

Answer 1

1

A revision of an estimate which extends the asset's useful life decreases depreciation expense and increases owners' equity

Option A is correct

2

Treating a capital expenditure as an immediate expense overstates expenses and understates net income

Option D is correct

3

Cost of a maintenance insurance plan after the machinery is up and running would not be included in the Machinery account

Option C is correct

4

Debit to Loss on Sale of Equipment for $900 (3500-2600)

Option D is correct