Question

1) On January 2, 2016, McNally's Extra Corporation acquired equipment for $120,000. The estimated life of the equipment is 5 years or 20,000 hours. The estimated residual value is $20,000. If McNally's Extra Corporation uses the straightminus−line method of depreciation, what will be the debit to Depreciation Expense for the year ended December 31, 2017, during which period the asset was used 4,500 hours?
A.$24,000
B.$20,000
C.$27,000
D.$22,500

2) Depreciable cost is defined as:
A.book value
B.asset's cost minus estimated residual value
C.cost minus accumulated depreciation
D.salvage value

3) Carrying amount is defined as:
A.current market value less accumulated depreciation
B.cost less salvage value
C.current market value less salvage value
D.cost less accumulated depreciation

4)Which of the following statements is true?
A.Depreciation means that a business sets aside cash to replace assets as they become fully amortized.
B.Accumulated depreciation is that portion of property, plant, and equipment's cost that has already been recorded as an expense.
C.Depreciation is a process of objective valuation.
D.Accumulated depreciation represents a growing amount of cash to be used to replace the existing asset.

Answer 1

1

Depreciable cost = Cost -Salvage value = 120000-20000 = $100000

Depreciation Expense = Depreciable cost/useful life = 100000/5 =$20000

Depreciation Expense for the year ended December 31, 2017 = $20000

Option B is correct

2

Depreciable cost is defined as asset's cost minus estimated residual value

Option B is correct

3

Carrying amount is defined as cost less accumulated depreciation

Option D is correct

4

Accumulated depreciation is that portion of property, plant, and equipment's cost that has already been recorded as an expense.

Option B is correct