Ghazaly Review Questions Ch 8 & Ch 10

T F 1. It is not necessary to report both the cost and the accumulated depreciation of plant assets in the financial statements. 2. Depreciation expense is an estimate that is based on predictions of the asset's salvage value and useful life. 3. Accumulated depreciation represents funds set aside to buy new assets when the assets currently owned are replaced. 4. When an asset is purchased (or disposed of) at a time other than the beginning or the end of an accounting period, depreciation is recorded for part of a year so that the year of purchase or the year of disposal is charged with its share of the asset's depreciation. 5. Revising an estimate of the useful life or salvage value of a plant asset is referred to as a change in accounting estimate, and is reflected in the past, current, and future financial statements. 6. The going concern principle supports the reporting of plant assets at book value rather than market value. 7. Total depreciation expense over an asset's useful life will be identical across all methods of depreciation. 8. Financial accounting and tax accounting require the same recordkeeping and there should be no difference in results between the two accounting systems. 9. Most companies use accelerated depreciation for tax purposes because it reduces taxable income due to higher depreciation expense in the early years of an asset's life.

F 10. The book value of an asset when using double-declining-balance depreciation is always greater then the book value from using straight-line depreciation, except at the beginning and the end of the asset's useful life when it is the same.

Information on a depreciable asset is as follows: Purchase date September 1, 2007 Purchase price $75,000 Salvage value $10,000 Useful life 4 years Depreciation method double-declining-balance If the asset is sold on January 1, 2010 for $13,000, the journal entry to record the sale will include: A) A credit to gain on sale for $8,000. B) A debit to loss on sale for $2,625. C) A credit to accumulated depreciation for $59,375. D) A debit to loss on sale for $3,042. E) A credit to gain on sale for $4,979.

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3. A company had a bulldozer destroyed by fire. The bulldozer originally cost $125,000. The accumulated depreciation on it was $60,000. The proceeds from the insurance company were $90,000. The company should recognize: A) A loss of $25,000. B) A gain of $25,000. C) A loss of $65,000. D) A gain of $65,000. E) A gain of $90,000. 4. A company purchased a cash register on January 1 for $5,400. This register has a useful life of 10 years and a salvage value of $400. What would be the depreciation expense for the second-year of its useful life using the double-declining-balance method? A) $ 500. B) $ 800. C) $ 864. D) $1,000. E) $1,080.

5. A company purchased a rope braiding machine for $190,000. The machine has a useful life of 8 years and a residual value of $10,000. It is estimated that the machine could produce 750,000 units of climbing rope over its useful life. In the first year, 105,000 units were produced. In the second year, production increased to 109,000 units. Using the units-of-production method, what is the amount of depreciation that should be recorded for the second year? A) $25,200. B) $26,160. C) $26,660. D) $27,613. E) $53,160.

T F

1.On a bank statement, deposits are listed as debits because the bank increases its cash account when the deposit is made. 2.A check involves 3 parties: the maker who signs the check, the payee who is the recipient, and the bank on which the check is drawn. 3.The payee is the person who signs a check, authorizing its payment. 4.Outstanding checks are checks the bank has paid and deducted from the customer's account during the month. F 5. Deposits in transit are deposits made and recorded by the depositor but not yet recorded on the bank statement.

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In the process of reconciling Marks Enterprises bank statement for September, Mr. Marks compiles the following information: Cash balance per company books on September 30 Deposits in transit at month-end Outstanding checks at month-end Bank charge for printing new checks Note receivable and interest collected by bank on Marks behalf A check given to Marks during the month by a customer is returned by the bank as NSF The adjusted cash balance per the books on September 30 is: A) $ 6,900 B) $ 8,160 C) $ 4,600 D) $ 6,520 E) $ 5,840 $6,275 $1,300 $ 620 $ 45 $ 770 $ 480

1. Yenn Company developed the following reconciling information in preparing its September bank reconciliation: Cash balance per bank, 9/30 $15,000 Note receivable collected by bank 6,000 Outstanding checks 9,000 Deposits in transit 4,500 Bank service charge 75 NSF check 1,200 Determine the cash balance per books (before adjustments) for Yenn Company.

2. Grant Company gathered the following reconciling information in preparing its July bank reconciliation: Cash balance per books, 7/31 $5,500 Deposits in transit 150 Notes receivable and interest collected by bank 850 Bank charge for check printing 20 Outstanding checks 2,000 NSF check 170 The adjusted cash balance per books on July 31 is a. $6,160. b. $6,010. c. $4,310. d. $4,460.

3. Jones Company had checks outstanding totaling $6,400 on its May bank reconciliation. In June, Jones Company issued checks totaling $39,900. The July bank statement shows that $29,700 in checks cleared the bank in July. A check from one of Jones Company's customers in the amount of $300 was also returned marked "NSF." The amount of outstanding checks on Jones Company's July bank reconciliation should be a. $19,600. b. $10,200. c. $16,600. d. $3,800.