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     75.     The composite life (in years) for these assets is
a.     9.1.
b.     9.3.
c.     9.7.
d.     10.0.

     76.     McCartney Company purchased a depreciable asset for $250,000 on April 1, 2005. The estimated salvage value is $25,000, and the estimated useful life is 5 years. The straight-line method is used for depreciation. What is the balance in accumulated depreciation on May 1, 2008 when the asset is sold?
a.     $90,000
b.     $105,000
c.     $123,750
d.     $138,750

     77.     George Martin Corporation purchased a depreciable asset for $300,000 on January 1, 2005. The estimated salvage value is $30,000, and the estimated useful life is 9 years. The straight-line method is used for depreciation. In 2008, George Martin changed its estimates to a total useful life of 5 years with a salvage value of $50,000. What is 2008 depreciation expense?
a.     $30,000
b.     $50,000
c.     $80,000
d.     $90,000

     78.     Windsor Company purchased a depreciable asset for $300,000 on April 1, 2005. The estimated salvage value is $30,000, and the estimated total useful life is 5 years. The straight-line method is used for depreciation. What is the balance in accumulated depreciation on May 1, 2008 when the asset is sold?

a.     $118,000
b.     $126,000
c.     $148,500
d.     $166,500

     79.     Garrison Corporation purchased a depreciable asset for $420,000 on January 1, 2005. The estimated salvage value is $42,000, and the estimated total useful life is 9 years. The straight-line method is used for depreciation. In 2008, Garrison changed its estimates to a useful life of 5 years with a salvage value of $70,000. What is 2008 depreciation expense?
a.     $42,000
b.     $70,000
c.     $112,000
d.     $126,000

     80.     Peppers Corporation owns machinery with a book value of $190,000. It is estimated that the machinery will generate future cash flows of $200,000. The machinery has a fair value of $140,000. Peppers should recognize a loss on impairment of
a.     $ -0-.
b.     $10,000.
c.     $50,000.
d.     $60,000.

     81.     Dillman Corporation owns machinery with a book value of $190,000. It is estimated that the machinery will generate future cash flows of $175,000. The machinery has a fair value of $140,000. Dillman should recognize a loss on impairment of
a.     $ -0-.
b.     $15,000.
c.     $50,000.
d.     $35,000.

     82.     Jantz Corporation purchased a machine on July 1, 2004, for $750,000. The machine was estimated to have a useful life of 10 years with an estimated salvage value of $42,000. During 2007, it became apparent that the machine would become uneconomical after December 31, 2011, and that the machine would have no scrap value. Accumulated depreciation on this machine as of December 31, 2006, was $177,000. What should be the charge for depreciation in 2007 under generally accepted accounting principles?
a.     $106,200
b.     $114,600
c.     $123,000
d.     $143,250

     83.     Weston Company purchased a tooling machine on January 3, 2000 for $500,000. The machine was being depreciated on the straight-line method over an estimated useful life of 10 years, with no salvage value. At the beginning of 2007, the company paid $125,000 to overhaul the machine. As a result of this improvement, the company estimated that the useful life of the machine would be extended an additional 5 years (15 years total). What should be the depreciation expense recorded for the machine in 2007?
a.     $34,375
b.     $41,667
c.     $50,000
d.     $55,000

     84.     Klein Co. purchased machinery on January 2, 2001, for $440,000. The straight-line method is used and useful life is estimated to be 10 years, with a $40,000 salvage value. At the beginning of 2007 Klein spent $96,000 to overhaul the machinery. After the overhaul, Klein estimated that the useful life would be extended 4 years (14 years total), and the salvage value would be $20,000. The depreciation expense for 2007 should be
a.     $28,250.
b.     $34,500.
c.     $40,000.
d.     $37,000.

     85.     Sloane, Inc. purchased equipment in 2005 at a cost of $600,000. Two years later it became apparent to Sloane, Inc. that this equipment had suffered an impairment of value. In early 2007, the book value of the asset is $360,000 and it is estimated that the fair value is now only $240,000. The entry to record the impairment is
a.     No entry is necessary as a write-off violates the historical cost principle.
b.     Retained Earnings          120,000
          Accumulated Depreciation—Equipment               120,000
c.     Loss on Impairment of Equipment          120,000
          Accumulated Depreciation—Equipment               120,000
d.     Retained Earnings          120,000
          Reserve for Loss on Impairment of Equipment               120,000

     86.     Tolan Resources Company acquired a tract of land containing an extractable natural resource. Tolan is required by its purchase contract to restore the land to a condition suitable for recreational use after it has extracted the natural resource. Geological surveys estimate that the recoverable reserves will be 2,000,000 tons, and that the land will have a value of $1,200,000 after restoration. Relevant cost information follows:
Land     $9,000,000
Estimated restoration costs     1,800,000
If Tolan maintains no inventories of extracted material, what should be the charge to depletion expense per ton of extracted material?
a.     $3.90
b.     $4.50
c.     $4.80
d.     $5.40

     87.     In January, 2007, Miley Corporation purchased a mineral mine for $3,400,000 with removable ore estimated by geological surveys at 2,000,000 tons. The property has an estimated value of $200,000 after the ore has been extracted. The company incurred $1,000,000 of development costs preparing the mine for production. During 2007, 500,000 tons were removed and 400,000 tons were sold. What is the amount of depletion that Miley should expense for 2007?
a.     $640,000
b.     $800,000
c.     $840,000
d.     $1,120,000


     88.     During 2007, Bolton Corporation acquired a mineral mine for $1,500,000 of which $200,000 was ascribed to land value after the mineral has been removed. Geological surveys have indicated that 10 million units of the mineral could be extracted. During 2007, 1,500,000 units were extracted and 1,200,000 units were sold. What is the amount of depletion expensed for 2007?
a.     $130,000.
b.     $156,000.
c.     $180,000.
d.     $195,000.

     89.     In March, 2007, Tylor Mines Co. purchased a coal mine for $6,000,000. Removable coal is estimated at 1,500,000 tons. Tylor is required to restore the land at an estimated cost of $720,000, and the land should have a value of $630,000. The company incurred $1,500,000 of development costs preparing the mine for production. During 2007, 450,000 tons were removed and 300,000 tons were sold. The total amount of depletion that Tylor should record for 2007 is
a.     $1,374,000.
b.     $1,518,000.
c.     $2,061,000.
d.     $2,277,000.

     90.     In 1999, Morton Company purchased a tract of land as a possible future plant site. In January, 2007, valuable sulphur deposits were discovered on adjoining property and Morton Company immediately began explorations on its property. In December, 2007, after incurring $400,000 in exploration costs, which were accumulated in an expense account, Morton discovered sulphur deposits appraised at $2,250,000 more than the value of the land. To record the discovery of the deposits, Morton should
a.     make no entry.
b.     debit $400,000 to an asset account.
c.     debit $2,250,000 to an asset account.
d.     debit $2,650,000 to an asset account.

Use the following information for questions 91 and 92:

For 2007, Colaw Company reports beginning of the year total assets of $900,000, end of the year total assets of $1,100,000, net sales of $1,250,000, and net income of $250,000.

     91.     Colaw’s 2007 asset turnover ratio is
a.     .23 times.
b.     .25 times.
c.     1.14 times.
d.     1.25 times.

     92.     The rate of return on assets for Colaw in 2007 is
a.     20.0%.
b.     22.7%.
c.     25.0%.
d.     27.8%.


     93.     Rubber Soul Company reported the following data:
     2007     2008
Sales     $2,000,000     $2,600,000
Net Income     300,000     400,000
Assets at year end     1,800,000     2,500,000
Liabilities at year end     1,100,000     1,500,000
What is Rubber Soul’s asset turnover for 2008?
a.     1.04
b.     1.07
c.     1.21
d.     1.44

     94.     Covington Company reported the following data:
     2007     2008
Sales     $2,000,000     $2,800,000
Net Income     300,000     400,000
Assets at year end     1,800,000     2,500,000
Liabilities at year end     1,100,000     1,500,000
What is Rubber Soul’s asset turnover for 2008?
a.     1.12
b.     1.15
c.     1.30
d.     1.56


Use the following information for questions 95 and 96:

On January 1, 2007, Newton Company purchased a machine costing $150,000. The machine is in the MACRS 5-year recovery class for tax purposes and has an estimated $30,000 salvage value at the end of its economic life.

     *95.     Assuming the company uses the general MACRS approach, the amount of MACRS deduction for tax purposes for the year 2007 is
a.     $30,000.
b.     $60,000.
c.     $48,000.
d.     $24,000.

     *96.     Assuming the company uses the optional straight-line method, the amount of MACRS deduction for tax purposes for the year 2007 is
a.     $24,000.
b.     $30,000.
c.     $12,000.
d.     $15,000.


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