Test 3

Question 1

On January 1, a machine with a useful life of four years and a residual value of $8,000 was purchased for $40,000. What is the depreciation expense for year 2 under straight-line depreciation?

Answer 1

$8,000

Question 2

A plant asset was purchased on January 1 for $60,000 with an estimated salvage value of $12,000 at the end of its useful life. The current year’s Depreciation Expense is $4,000 calculated on the straight-line basis and the balance of the Accumulated Depreciation account at the end of the year is $20,000. The remaining useful life of the plant asset is

Answer 2

7 years

Question 3

Machinery was purchased for $85,000. Freight charges amounted to $3,500 and there was a cost of $10,000 for building a foundation and installing the machinery. It is estimated that the machinery will have a $15,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be

Answer 3

$16,700

Question 4

Significant influence

Debit or Equity?

Answer 4

Equity

Question 5

Held-to-Maturity

Debit or Equity?

Answer 5

Debit

Question 6

Available-for-Sale

Debit or Equity?

Answer 6

Debit

Question 7

Controlling interest

Debit or Equity?

Answer 7

Equity

Question 8

Trading

Debit or Equity?

Answer 8

Debit

Question 9

No Significant Influence

Debit or Equity?

Answer 9

Equity

Question 10

Match the investment characteristic with the investment type

Investment Types

Trading	
Held-to-Maturity
Available-for-Sale
No significant influence
Significant influence
Controlling interest

Options

A. Consolidated into Investors financial statements
B. Debt investment that is not actively trading
C. Investor owns less than 20%
D. Investor has ability to influence financial and operating decisions
E. Goal is to generate a quick profit
F. Investor intends to hold this debit investment

Answer 10

Trading
E. Goal is to generate a quick profit

Held-to-Maturity
F. Investor intends to hold this debit investment

Available-for-Sale
B. Debt investment that is not actively trading

No significant influence
C. Investor owns less than 20%

Significant influence
D. Investor has ability to influence financial and operating decisions

Controlling interest
A. Consolidated into Investors financial statements