Pharoah Company purchased equipment and these costs were incurred: Cash price $4

Question

Pharoah Company purchased equipment and these costs were incurred:

Cash price

$49000

Sales taxes

3700

Insurance during transit

670

Installation and testing

900

Total costs

$54270

Pharoah will record the acquisition cost of the equipment as

$53370.

$54270.

$52700.

$49000.

Ayayai Corp. purchased a delivery van with a $50000 list price. The company was given a $4000 cash discount by the dealer, and paid $2500 sales tax. Annual insurance on the van is $1000. As a result of the purchase, by how much will Ayayai Corp. increase its van account?

$48500.

$46000.

$50000.

$49000.

Pharoah Company purchased machinery on January 1 at a list price of $270000, with credit terms 2/10, n/30. Payment was made within the discount period. Pharoah paid $79750 sales tax on the machinery, and paid installation charges of $4800. Prior to installation, Pharoah paid $10900 to pour a concrete slab on which to place the machinery. What is the total cost of the new machinery?

$365450

$344350.

$349150.

$360050.

Equipment was purchased for $90000 on January 1, 2016. Freight charges amounted to $3800 and there was a cost of $10000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $21000 salvage value at the end of its 5-year useful life. What is the amount of accumulated depreciation at December 31, 2017, if the straight-line method of depreciation is used?

$15240.

$28400.

$33120.

$16560.

Equipment with a cost of $229000 has an estimated salvage value of $29000 and an estimated life of 4 years or 10000 hours. It is to be depreciated by the straight-line method. What is the amount of depreciation for the first full year, during which the equipment was used 5000 hours?

$50000.

$57250.

$100000.

$54750.

Concord Corporation bought equipment on January 1, 2017. The equipment cost $390000 and had an expected salvage value of $75000. The life of the equipment was estimated to be 6 years. The depreciable cost of the equipment is

$75000.

$315000.

$52500.

Ivanhoe Company bought a machine on January 1, 2017. The machine cost $124000 and had an expected salvage value of $28000. The life of the machine was estimated to be 5 years. The company uses the straight-line method of depreciation. The book value of the machine at the beginning of the third year would be

$124000.

$96000.

$85600.

$38400.

$390000.

Cullumber Company bought equipment for $450000 on January 1, 2016. Cullumber estimated the useful life to be 5 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2017, Cullumber decides that the business will use the equipment for a total of 10 years. What is the revised depreciation expense for 2017?

$50000.

$90000.

$36000.

$40000.

Cash price

$49000

Sales taxes

3700

Insurance during transit

670

Installation and testing

900

Total costs

$54270

Explanation / Answer

Ans. 1 $54,270 Acquisition cost = Cash price + Sales taxes + Insurance during transit + Installation and testing 49000 + 3700 + 670 + 900 54270 Ans. 2 $48,500.00 increase in van account = cost + sales tax - discount 50000 + 2500 - 4000 48500 Ans. 3 360050 List price 270000 Less - Discount @2% 5400 264600 Add : Sales tax 79750 Installation charges 4800 Concrete slab expenses 10900 360050 Ans. 4 $16,560 Straight line depreciation = cost of equipment - salvage value / useful life 103800 - 21000 / 5 16560 * Cost of equipment = purchase cost + freight charges + installation charges 90000 + 3800 + 10000 103800 Ans. 5 $100,000 depreciation = cost of equipment - salvage value / estimated hours * usage (229000 - 29000) / 10000 * 5000 200000 / 10000 * 5000 100000 Ans. 6 $315,000 Depreciable cost = Cost of equipment - salvage value 390000 - 75000 315000 Ans. 7 $85,600 Straight line depreciation = cost - salvage value / estimated life 124000 - 28000 / 5 19200 first year depreciation 19200 second year depreciation 19200 third year book value = cost - (19200 * 2) 124000 - 38400 85600 Ans. 8 $50,000 Calculation : depreciation on 31dec 2016 90000 (cost / useful life = 450000 / 5) Remaining book value (450000 - 90000) 360000 Remaining years ( 10 - 1) 9 depreciation (360000 / 9) 40000 Revised depreciation expenses = 90000 - 40000 50000

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