Question

1.A building with an appraisal value of $135,912 is made available at an offer price of $153,876. The purchaser acquires the property for $37,176 in cash, a 90-day note payable for $24,514, and a mortgage amounting to $58,919. The cost basis recorded in the buyer's accounting records to recognize this purchase is

a. $120,609

b. $116,700

c. $135,912

d. $153,876

2.A machine with a cost of $136,000 has an estimated residual value of $17,000 and an estimated life of 5 years or 17,000 hours. It is to be depreciated by the units-of-activity method. What is the amount of depreciation for the second full year, during which the machine was used 5,000 hours?

a. $18,000

b. $35,000

c. $5,000

d. $45,000

3.A used machine with a purchase price of $35,635, requiring an overhaul costing $8,370, installation costs of $4,426, and special acquisition fees of $17,427, would have a cost basis of

a. $35,635

b. $44,005

c. $65,858

d. $96,081

Answer 1

1
Cash paid	37176
Notes payable	24514
Mortgage payable	58919
Cost basis	120609
Option A $120,609 is correct
2
Depreciation per hour	7	=(136000-17000)/17000
Depreciation for the second full year	35000	=5000*7
Option B $35,000 is correct
3
Purchase price	35635
Overhaul	8370
Installation costs	4426
Special acquisition fees	17427
Cost basis	65858
Option C $65,858 is correct