1.
Ron’s Quik Shop bought equipment for $140,000 on January 1, 2021. Ron estimated the useful life to be 5 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2022, Ron decides that the business will use the equipment for a total of 6 years. What is the revised depreciation expense for 2022?
| A. | $18,666 | |
| B. | $11,200 | |
| C. | $28,000 | |
| D. | $22,400 |
2.
On January 1, a machine with a useful life of five years and a salvage value of $25,000 was purchased for $125,000. What is the depreciation expense for year 2 under straight-line depreciation?
| A. | $15,000 | |
| B. | $60,000 | |
| C. | $20,000 | |
| D. | $75,000 |
3.
Machinery was purchased for $340,000. Freight charges amounted to $14,000 and there was a cost of $40,000 for building a foundation and installing the machinery. It is estimated that the machinery will have a $60,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be
| A. | $66,800. | |
| B. | $57,200. | |
| C. | $78,800. | |
| D. | $56,000. |
4.
An asset was purchased for $400,000. It had an estimated salvage value of $80,000 and an estimated useful life of 10 years. After 5 years of use, the estimated salvage value is revised to $64,000 but the estimated useful life is unchanged. Assuming straight-line depreciation, depreciation expense in Year 6 would be
| A. | $33,600. | |
| B. | $35,200. | |
| C. | $48,000. | |
| D. | $24,000. |
5.
Which of the following is not an advantage of leasing a long-term asset?
| A. | reduced risk of obsolescence | |
| B. | no depreciation | |
| C. | shared tax benefits | |
| D. | lower down payment |
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