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Sample Questions
Introduction to Financial Accounting II
Depreciation Expense
 
Scenario I
Planet Plastics Inc. makes toys. It recently bought a new machine, on January 1, that molds plastic pellets into the desired shapes. The price of that machine was $60,000. It cost $1,500 to deliver the machine to the factory. It cost $2,500 to install and properly calibrate the machine. It has an expected useful life of 8 years, and is expected to have a zero salvage value at the end of those 8 years. Planet Plastics uses the straight-line method of depreciation.


1) What is the capital cost of the new machine?

 a)  $58,500.

 b)  $62,500.

 c)  $61,500.

 d)  $64,000.

 e)  None of the above.



2) What is the depreciable cost of the new machine?

 a)  $61,500.

 b)  $64,000.

 c)  $57,500.

 d)  $56,000.

 e)  None of the above.



3) What is the amount of the annual depreciation?

 a)  $8,000.

 b)  $7,750.

 c)  $7,500.

 d)  $7,000.

 e)  None of the above.



4) Write the journal entry for the first year's depreciation.

 a)  Depreciation Expense   .....................   7,500.00
          Accumulated Depreciation   ..............              7,500.00
             To record depreciation expense.


 b)  Depreciation Expense   .....................   8,000.00
          Accumulated Depreciation   ..............              8,000.00
             To record interest expense.


 c)  Accumulated Depreciation   .................   8,000.00
          Depreciation Expense   ..................              8,000.00
             To record depreciation expense.


 d)  Depreciation Expense   .....................   8,000.00
          Accumulated Depreciation   ..............              8,000.00
             To record depreciation expense.


 e)  None of the above.



5) What is the gross value of the machine in the books at the end of the first year?

 a)  $66,500.

 b)  $62,500.

 c)  $64,000.

 d)  $58,500.

 e)  None of the above.



6) What is the net value of the machine in the books at the end of the first year?

 a)  $54,000.

 b)  $57,500.

 c)  $58,000.

 d)  $56,000.

 e)  None of the above.



7) What is the gross value of the machine in the books at the end of the second year?

 a)  $64,000.

 b)  $61,500.

 c)  $62,500.

 d)  $58,500.

 e)  None of the above.



8) What is the net value of the machine in the books at the end of the second year?

 a)  $52,000.

 b)  $50,000.

 c)  $48,000.

 d)  $56,000.

 e)  None of the above.



9) What is the amount of accumulated depreciation of the machine in the books at the end of the eighth year?

 a)  $62,500.

 b)  $64,000.

 c)  $61,500.

 d)  $56,000.

 e)  None of the above.



10) What is the net value of the machine in the books at the end of the eighth year?

 a)  $0.

 b)  $8,000.

 c)  $4,000.

 d)  $2,500.

 e)  None of the above.





Scenario II
Planet Plastics Inc. makes toys. It recently bought a new machine, on January 1, that molds plastic pellets into the desired shapes. The price of that machine was $60,000. It cost $1,500 to deliver the machine to the factory. It cost $2,500 to install and properly calibrate the machine. It has an expected useful life of 8 years, and is expected to have a zero salvage value at the end of those 8 years. Planet Plastics uses the double declining balance method of depreciation.

11) What is the depreciation percent of the new machine that will be used to compute the depreciation amount?

 a)  $8,000.

 b)  12.5%.

 c)  0.25%.

 d)  25%.

 e)  None of the above.



12) What is the amount of depreciation in the first year?

 a)  $8,000.

 b)  $16,000.

 c)  $15,500.

 d)  $15,250.

 e)  None of the above.



13) Write the journal entry for the first year's depreciation.

 a)  Accumulated Depreciation   .................  16,000.00
          Depreciation Expense   ..................             16,000.00
             To record depreciation expense.


 b)  Depreciation Expense   .....................   8,000.00
          Accumulated Depreciation   ..............              8,000.00
             To record depreciation expense.


 c)  Depreciation Expense   .....................  15,500.00
          Accumulated Depreciation   ..............             15,500.00
             To record depreciation expense.


 d)  Depreciation Expense   .....................  16,000.00
          Accumulated Depreciation   ..............             16,000.00
             To record depreciation expense.


 e)  None of the above.



14) What is the net value of the machine in the books at the end of the first year?

 a)  $52,000.

 b)  $50,000.

 c)  $48,000.

 d)  $56,000.

 e)  None of the above.



15) What is the amount of depreciation in the second year?

 a)  $12,000.

 b)  $8,000.

 c)  $16,000.

 d)  $10,000.

 e)  None of the above.



16) What is the amount of accumulated depreciation of the machine in the books at the end of the second year?

 a)  $16,000.

 b)  $22,000.

 c)  $12,000.

 d)  $28,000.

 e)  None of the above.



17) What is the net value of the machine in the books at the end of the second year?

 a)  $38,500.

 b)  $48,000.

 c)  $36,000.

 d)  $28,000.

 e)  None of the above.



18) What is the amount of depreciation in the eighth year?

 a)  $2,848.

 b)  $2,136.

 c)  $1,602.

 d)  $0.

 e)  None of the above.



19) What is the amount of accumulated depreciation of the machine in the books at the end of the eighth year?

 a)  $52,609.

 b)  $57,593.

 c)  $55,457.

 d)  $59,195.

 e)  None of the above.



20) What is the net value of the machine in the books at the end of the eighth year?

 a)  $6,407.

 b)  $0.

 c)  $4,805.

 d)  $11,391.

 e)  None of the above.






 

 

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