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.