multiple choice questions 1 anniston company purchased equipmen 253400

Multiple-Choice questions

1. Anniston Company purchased equipment and incurred the following costs:

Purchase price ………………$40,000

Cost of trial runs …………… 800

Installation costs …………… 200

Sales tax …………………….. 2,000

What is the cost of the equipment?

a. $40,000

b. $42,000

c. $42,900

d. $43,000

2. The cost principle requires that companies record fixed assets at

a. Historical cost

b. Fair value

c. Book value

d. Market value

3. When depreciation expense is recorded each period, what account is debited?

a. Accumulated Depreciation

b. Cash

c. Depreciation Expense

d. The fixed asset account involved

4. What amount would Cox record as accumulated depreciation at December 31, 2010, if the straight-line depreciation method were used?

a. $284,400

b. $316,000

c. $320,000

d. $324,000

5. What amount would Cox record as depreciation expense at December 31, 2010, if the double-declining-balance method were used?

a. $192,000

b. $193,600

c. $316,000

d. $320,000

6. What amount would Cox record as depreciation expense for 2009 if the units-of-production method were used (round your answer to the nearest dollar)?

a. $200,000

b. $237,000

c. $240,000

d. $268,000

7. Which of the following statements is true regarding depreciation methods?

a. The use of a declining-balance method of depreciation will produce lower depreciation charges in the early years of an asset’s life compared to the straight-line depreciation method.

b. Over the life of an asset, a declining-balance depreciation method will recognize more depreciation expense relative to the straight-line method.

c. The use of a higher estimated life and a higher residual value will lower the annual amount of depreciation expense recognized under the straight-line method.

d. The use of a declining-balance method instead of the straight-line method will produce higher book values for an asset in the early years of the asset’s life.

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