Test 3 ABO exam questions and answers
graded A+
ABO purchased a truck at the beginning of 2020 for $140,000. They sold the
truck at the end of 2023 for $65,000. If the expected useful life of the truck was
six years with a residual value of $20,000 and ABO uses straight-line
depreciation, which of the following is true regarding the entry to record the sale
of the truck? - CORRECT ANSWER-Depreciation expense = ($140,000 -
$20,000)/6 years = $20,000/year. After four years accumulated depreciation =
$80,000 and book value of truck = $140,000 - $80,000 = $60,000. If sold for
$65,000 then gain = $5,000.
The correct answer is: Credit Gain $5,000.
OAK purchased a delivery truck on July 1, 2021. The following information is
available:
Cost = $100,000
Estimated service life = 5 years
Estimated residual value = $20,000
Calculate the balance of accumulated depreciation on December 31, 2022, using
straight-line depreciation. - CORRECT ANSWER-SL depreciation = ($100,000 -
$20,000)/5 years = $16,000/year
After 1.5 years, accumulated depreciation would be $24,000.
2021 depreciation = $16,000 x 6/12 = $8,000 + $16,000 for 2022
The correct answer is: $24,000
Stanley borrows $300,000 to be paid off in three years. The loan payments are
semiannual with the first payment due in six months, and interest is at 6%. What
is the amount of each payment? - CORRECT ANSWER-PV = PMT x Table 4
Factor (n = 6, I = 3%)
$300,000 = PMT x 5.41719
PMT = $300,000/5.41719 = $55,379
The correct answer is: $55,379
, Wilson Inc. owns equipment for which it originally paid $70 million and has
recorded accumulated depreciation on the equipment of $12 million. Due to
adverse economic conditions, Wilson's management determined that it should
assess whether an impairment should be recognized for the equipment. The
estimated future cash flows to be provided by the equipment total $60 million,
and its fair value at that point totals $50 million. Under these circumstances,
Wilson: - CORRECT ANSWER-The equipment is not impaired since the
estimated future cash flows of $60 million exceed the current carrying value ($58
million).
The correct answer is: Would record no impairment loss on the equipment.
On November 1, 2020, NoleCo signed a $100,000, 6%, six-month note payable
with the amount borrowed plus accrued interest due six months later on May 1,
2021. NoleCo records the appropriate adjusting entry for the note on December
31, 2020. In recording the payment of the note plus accrued interest at maturity
on May 1, 2021, NoleCo would: - CORRECT ANSWER-Interest expense in 2021
will be $100,000 x .06 x 4/12 = $2,000
The correct answer is: Debit Interest Expense, $2,000.
A company has the following expenditures during the year.
Advertising
$
100,000
Employee training
80,000
Customer outreach and consultation
50,000
The company believes that these efforts have increased the fair value of the
entire company by $325,000. How much goodwill can the company recognize at
the end of the year associated with these expenditures? - CORRECT
ANSWER-Goodwill may only be recognized when one company buys another
graded A+
ABO purchased a truck at the beginning of 2020 for $140,000. They sold the
truck at the end of 2023 for $65,000. If the expected useful life of the truck was
six years with a residual value of $20,000 and ABO uses straight-line
depreciation, which of the following is true regarding the entry to record the sale
of the truck? - CORRECT ANSWER-Depreciation expense = ($140,000 -
$20,000)/6 years = $20,000/year. After four years accumulated depreciation =
$80,000 and book value of truck = $140,000 - $80,000 = $60,000. If sold for
$65,000 then gain = $5,000.
The correct answer is: Credit Gain $5,000.
OAK purchased a delivery truck on July 1, 2021. The following information is
available:
Cost = $100,000
Estimated service life = 5 years
Estimated residual value = $20,000
Calculate the balance of accumulated depreciation on December 31, 2022, using
straight-line depreciation. - CORRECT ANSWER-SL depreciation = ($100,000 -
$20,000)/5 years = $16,000/year
After 1.5 years, accumulated depreciation would be $24,000.
2021 depreciation = $16,000 x 6/12 = $8,000 + $16,000 for 2022
The correct answer is: $24,000
Stanley borrows $300,000 to be paid off in three years. The loan payments are
semiannual with the first payment due in six months, and interest is at 6%. What
is the amount of each payment? - CORRECT ANSWER-PV = PMT x Table 4
Factor (n = 6, I = 3%)
$300,000 = PMT x 5.41719
PMT = $300,000/5.41719 = $55,379
The correct answer is: $55,379
, Wilson Inc. owns equipment for which it originally paid $70 million and has
recorded accumulated depreciation on the equipment of $12 million. Due to
adverse economic conditions, Wilson's management determined that it should
assess whether an impairment should be recognized for the equipment. The
estimated future cash flows to be provided by the equipment total $60 million,
and its fair value at that point totals $50 million. Under these circumstances,
Wilson: - CORRECT ANSWER-The equipment is not impaired since the
estimated future cash flows of $60 million exceed the current carrying value ($58
million).
The correct answer is: Would record no impairment loss on the equipment.
On November 1, 2020, NoleCo signed a $100,000, 6%, six-month note payable
with the amount borrowed plus accrued interest due six months later on May 1,
2021. NoleCo records the appropriate adjusting entry for the note on December
31, 2020. In recording the payment of the note plus accrued interest at maturity
on May 1, 2021, NoleCo would: - CORRECT ANSWER-Interest expense in 2021
will be $100,000 x .06 x 4/12 = $2,000
The correct answer is: Debit Interest Expense, $2,000.
A company has the following expenditures during the year.
Advertising
$
100,000
Employee training
80,000
Customer outreach and consultation
50,000
The company believes that these efforts have increased the fair value of the
entire company by $325,000. How much goodwill can the company recognize at
the end of the year associated with these expenditures? - CORRECT
ANSWER-Goodwill may only be recognized when one company buys another
