Sample CPA Exam Questions
1. In January 2008,Vorst Co. purchased a mineral mine for $2,820,000 with removable ore estimated at 1,200,000 tons. After it has extracted all the ore, Vorst believes it will be able to sell the property for $300,000. During 2008, Vorst incurred $360,000 of development costs preparing the mine for production and removed and sold 60,000 tons of ore. In its 2008 income statement, what amount should Vorst report as depletion?
(a) $135,000
(b) $144,000
(c) $150,000
(d) $159,000
2. Turtle Co. purchased equipment on January 2, 2006, for $50,000. The equipment had an estimated 5 year service life with an expected salvage value of $0. Turtle’s policy for 5 year assets is to use the double declining balance depreciation method for the first two years of the asset’s life and then switch to the straight line depreciation method. In its December 31, 2008, balance sheet, what amount should Turtle report as accumulated depreciation for equipment?
(a) $30,000
(b) $38,000
(c) $39,200
(d) $42,000