Question 1
Which of the following is not capitalized when a piece of production equipment is acquired for a factory?
Sales taxes.
Installation costs.
Transportation costs.
Ordinary repairs.
Question 2
On January 1, 200X Post Company purchased a machine for $80,000. The machine had a salvage value of $8,000 and a useful life of 10 years. Using straight line depreciation, the accounting entry for recording depreciation expense for the second year of operation would be:
Debit depreciation expense – $7,200, credit accumulated depreciation – $7,200.
Debit depreciation expense – $8,000, credit accumulated depreciation – $8,000.
Debit depreciation expense – $8,000, credit machine – $8,000.
Debit depreciation expense – $4,000, credit machine – $4,000.
Question 3
Post Company uses straight- line depreciation for all of its depreciable assets. Post sold a piece of machinery on December 31, 2009, that it purchased on January 1, 2009 for $ 2,000. The asset had a five- year life and zero residual value. Accumulated depreciation was $400. If the sales price of the used machine was $ 1,200, the resulting gain or loss on disposal was which of the following amounts?
Loss of $ 400.
Loss of $800
Gain of $400
Gain of $ 1,200.
Question 4
Post Company purchased a patent on January 1, 200X for $50,000. The patent has a useful life of 10 years. The accounting entry to record the patent amortization expense for the first year would be:
Debit patent amortization expense $50,000; credit patent $50,000.
Debit patent amortization expense $5,000; credit patent $5,000.
Debit patent $50,000; credit accounts payable $50,000.
Debit patent $5,000; credit accounts payable $5,000.