A) Equipment was purchased for $800,000 on January 1, 2014. It has an estimated useful life of 8 years and a residual value of $120,000. Depreciation is being computed using the straight line method. What amount should be shown for the Equipment, net of accumulated depreciation, in the company’s December 31, 2015 balance sheet?
a. $595,000.
b. $630,000.
c. $510,000.
d. $715,000.
B) Joe’s Copy Shop bought equipment for $60,000 on January 1, 2013. Joe estimated the useful life to be 3 years with no salvage value, and the straight line method of depreciation will be used. On January 1, 2014, Joe decides that the business will use the equipment for a total of 5 years. What is the revised depreciation expense for 2014?
a. $10,000.
b. $15,000.
c. $20,000.
d. $8,000.
C) Wells Company’s delivery truck, with a cost of $56,000 was destroyed by fire. At the time of the fire, the balance of the Accumulated Depreciation account amounted to $38,000. The company received $32,000 reimbursement from its insurance company. The gain or loss as a result of the fire was
a. $14,000 gain.
b. $24,000 gain.
c. $24,000 loss.
d. $14,000 loss.
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