Question

Q-1) A company purchases equipment on April 1st, 2016 for $25,000. The equipment is estimated to have a residual (salvage) value of $3,000, and an estimated life of 8 years. The company has a December 31st fiscal year-end, and uses the straight-line method for recording depreciation. What is the company's accumulated depreciation for this equipment at December 31st, 2017.

a) None of the other answers is correct

b) $2,062.50

c) $4,812.50

d) $2,750

Q-2)Under ASPE, described on page 4-12 of the text, which of the following must be true before revenue can be recognised?

a)The amount of revenue can be reasonably measured.

b)All of the other answers must occur before revenue can be recognised.

c)he risks and rewards of ownership of the goods have been transferred to the customer.

d)Collection of payment is judged to be probable.

Q-3)Under the contract based approach, revenue is recognised when:

a)the contract has commercial substance.

b)the transaction price has been determined

c)the performance obligation has been defined

d)a company's net position is increased.

Answer 1

Depreciation is a normal wear and tear of an asset

straight line method is one of the method of depreciation

cost = $25,000

salvage= 3,000

Number of years = 8

=[$25,000-$3,000]/8

=$2,750 per year

__________________________

Depreciation for 2016= 9 months (April-Dec)

depreciation for 2016=$2,750/12*9 months

=$2,062.5

depreciation for 2017 =$2,750

____________________________

Accumulated depreciation upto 31st December 2017 = 2016 depreciation +2017 depreciation

$2,062.5+$2,750

=$4,812.5

Answer C)