UAB AC 200 - Exam 3 with 100% correct answers.

Digger Enterprises purchased equipment for $64,000. In addition, shipping charges of $800 were incurred to obtain the equipment. The company paid $5,000 to construct a foundation and install the equipment. The equipment is estimated to have a residual value of $6,000 at the end of its 5-year useful life. Using the straight-line method, what is the book value of the equipment at the end of the third full year of use? a. $22,120 b. $28,400 c. $31,520 d. $25,520 C. $31,520 Zebra Inc. buys new soda machines for $450,000 and pays $50,000 for installation costs. One-half of the total cost or $250,000 is paid in cash; a note in the amount of $250,000 is signed. How should the company record this transaction? a. Debit Cash for $250,000, debit Notes Payable for $250,000, and credit Equipment for $500,000 b. Debit Cash for $250,000, debit Notes Payable for $250,000, credit Equipment for $450,000, and credit Operating Expenses for $50,000 c. Debit Equipment for $450,000, debit Operating Expenses for $50,000, credit cash for $250,000, and credit Notes Payable for $250,000 d. Debit Equipment for $500,000, credit Cash for $250,000, and credit Notes Payable for $250,000 D. Debit Equipment for $500,000, credit Cash for $250,000, and credit Notes Payable for $250,000 Which of the following accurately describes the treatment of ordinary and extraordinary repairs? a. Ordinary repairs are expensed as incurred; extraordinary repairs are expensed as incurred. b. Ordinary repairs are treated as a capital expenditure; extraordinary repairs are expensed as incurred. c. Ordinary repairs are expensed as incurred; extraordinary repairs are capitalized. d. Ordinary repairs are treated as a capital expenditure; extraordinary repairs are treated as a capital expenditure. c. Ordinary repairs are expensed as incurred; extraordinary repairs are capitalized. Cockroach Company purchased a new van on January 1, 2016. The van cost $32,000. It has an estimated life of five years and the estimated residual value is $4,100. Cockroach uses the double-declining-balance method to compute depreciation. What is the adjusted balance in the Accumulated Depreciation account at the end of 2017, the second year? a. $5,120. b. $20,480. c. $6,400 d. $15,360. b. $20,480. Accumulated Depreciation: a. appears on the income statement. b. is a liability on the balance sheet. c. is a contra-stockholders' equity item. d. appears in the asset section of a balance sheet. d. appears in the asset section of a balance sheet A company paid $500,000 to purchase equipment and $15,000 to have the equipment delivered to and installed in the company's production facilities. Commercial use of the equipment began on March 1, 2017. The estimated residual value of the equipment is $5,000. The equipment is expected to be used a total of 28,000 hours throughout its estimated useful life of six years. The company has a December 31, 2017 year-end and had used the equipment a total of 11,200 hours prior to the year-end. Using the units-of-production method, what amount of depreciation expense (to the nearest thousand) would the company report for this equipment in the income statement prepared for the year-ended December 31, 2017? a. $102,000 b. $198,000 c. $204,000 d. $206,000 c. $204,000 Which of the following statements most appropriately describes the purpose of depreciating a long-lived tangible asset? a. To indicate how the asset has physically deteriorated. b. To record that the asset's market value declines over time. c. To match the cost of the asset to the period in which it generates revenue. d. To reflect the concept of conservatism and enhance earnings per share. c. To match the cost of the asset to the period in which it generates revenue. The journal entry to record depreciation: a. decreases assets and decreases net income. b. decreases assets and increases net income c. increases assets and decreases net income. d. Increases assets and decreases liabilities a. decreases assets and decreases net income. During one pay period, your company distributes $133,000 to employees as net pay. The income tax withholdings were $19,500 and the employee's share of FICA withholdings were $8,963. Total payroll/labor costs to the company for this pay period, excluding any unemployment taxes, was: a. $133,000. b. $161,463. c. $152,500. d. $170,426 d. $170,426 Gross earnings for the pay period are $100,000. Required payroll deductions are: Social Security $6,700; Medicare $1,450; Federal Income tax $18,000 and State income tax $3,850. What is the net pay to employees? a. $70,000 b. $100,000 c. $130,000 d. $78,150 a. $70,000 Which of the following events does not create a liability? a. Buying goods and services on credit b. Obtaining a short-term loan c. Issuing long-term debt d. Remitting (sending in) sales tax to the government d. Remitting (sending in) sales tax to the government