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ACCOUNTING PRINCIPLES I

EXAM 6 (Chapter 9)

2013 – Businsky

Name ________________________

POINTS

 

 

 

 

 

					Save Time On Research and Writing Hire a Pro to Write You a 100% Plagiarism-Free Paper. Get My Paper		POINTS
PROBLEM	POSSIBLE	RECEIVED
1	5
2	15
3	50
4	30
TOTAL	100

Problem #1

(1 points each) Circle the correct answer.

1. Which of the following is not a plant asset?

a. land

b. furniture

c. buildings

d. supplies

2. Accumulated depreciation is classified as a(n)

a. expense account.

b. liability account.

c. asset account.

d. contra-asset account.

3. Book value is defined as a. depreciation expense plus accumulated depreciation. b. the cost of a plant asset less depreciation expense. c. the cost of a plant asset plus accumulated depreciation. d. the cost of a plant asset less accumulated depreciation.

4. Which statement below is false regarding the double-declining balance method of depreciation? a. Residual value is ignored entirely using the double-declining balance method. b. Many companies switch from the double-declining balance method to the straight-line method during the next-to-last year of the asset’s life c. The double-declining balance method uses a rate that is twice the straight-line rate. d. Final-year depreciation is the amount needed to bring the asset to its estimated residual value.

5. Interest expense should be recorded in the period:

a. that the expense is incurred

b. a note payable is recorded

c. when the note is paid

d. on the date that the note is issued

Problem 2 Show All Calculations (15 Points)

On July 1, Obi Wan Company pays $500,000 for a piece of real estate that contains Land, Building, and Equipment. The fair value of the Land is $200,000, the fair value of the Building is $250,000, and the fair value of the equipment is $150,000.

Directions:
Prepare the journal entry for Obi Wan to allocate the total cost of the purchase among the assets. Include an explanation.

Land 200,000
200,000/600,000 = 33% X 500,000 = 165,000

Building 250,000
250,000/600,000 = 42% X 500,000 = 210,000

Equipment 150,000
150,000/600,000 = 25% X 500,000 = 125,000

	DATE		DESCRIPTION		REF		DEBIT		CREDIT

Problem 3 Show All Calculations (50 points)

Noah’s Printing bought equipment on Jan. 1, 2012 for $50,000. The equipment was expected to remain in service for four years and to perform 11,000 print jobs. At the end of the equipment’s useful life, Noah’s estimates that its residual value will be $4000. The equipment performed 1000 print jobs in 2012, 3,400 print jobs in 2013, 4,000 print jobs in 2014 and 2,600 print jobs in 2015.

Directions:
Prepare a schedule of depreciation expense per year for the equipment under the three depreciation methods. After two years under double-declining balance depreciation, the company switched to the straight line method.

Straight Line Depreciation

		Year			Depreciation Expense			Accumulated Depreciation			Book Value

Units of Production

Year

Depreciation Expense

Accumulated Depreciation

Book Value

Double Declining Balance

Year

Depreciation Expense

Accumulated Depreciation

Book Value

Problem 4 Show All Calculations (30 points)

Based on Problem 3’s depreciation results that you calculated, indicate the journal entries Noah’s Printing would use for depreciation
for the year 2014 for each method of depreciation: straight-line, unit of production and double declining balance.

DATE

DESCRIPTION

REF

DEBIT

CREDIT

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