On January 1, 2021, Jacob Inc. purchased a commercial truck for $48,000 and uses the straight-line depreciation method

On January 1, 2021, Jacob Inc. purchased a commercial truck for $48,000 and uses the straight-line depreciation method. The truck has a useful life of eight years and an estimated residual value of $8,000.
On December 31, 2022, the truck was exchanged for a new truck valued at $60,000. Jacob received a trade allowance of $35,000 on the exchange with the remaining $25,000 paid in cash. What amount of gain or loss should Jacob Inc. record on December 31, 2022?

A) Gain, $5,000.

B) Loss, $18,000.

C) Loss, $38,000.

D) Loss, $3,000.

Answer: D

Alliance Products purchased equipment that cost $120,000. It had an estimated useful life of four years and no residual value. The equipment was depreciated by the straight-line method and was sold at the end of the second year of use.
For what amount should Alliance record the gain or loss if the equipment is sold for $65,000?

A) Gain of $5,000.

B) Loss of $5,000.

C) Neither a gain nor a loss since the equipment was sold at its book value.

D) Neither a gain nor a loss since the gain would not be recognized.

Answer: A

Alliance Products purchased equipment that cost $120,000. It had an estimated useful life of four years and no residual value. The equipment was depreciated by the straight-line method and was sold at the end of the third year of use.
For what amount should Alliance record the gain or loss if the equipment is sold for $25,000?

A) A gain of $5,000.

B) A loss of $5,000.

C) Neither a gain nor a loss since the equipment was sold at its book value.

D) Neither a gain nor a loss since the gain would not be recognized.

Answer: B

On January 1, 2021, Jacob Inc. purchased a commercial truck for $48,000 and uses the straight-line depreciation method

On January 1, 2021, Jacob Inc. purchased a commercial truck for $48,000 and uses the straight-line depreciation method. The truck has a useful life of eight years and an estimated residual value of $8,000.
Assume the truck was totaled in an accident on December 31, 2022. What amount of gain or loss should Jacob Inc. record on December 31, 2022?

A) Gain, $5,000.

B) Loss, $18,000.

C) Loss, $38,000.

D) Loss, $3,000.

Answer: C

On January 1, 2020, Jacob Inc. purchased a commercial truck for $48,000 and uses the straight-line depreciation method. The truck has a useful life of eight years and an estimated residual value of $8,000.
On December 31, 2021, Jacob Inc. sold the truck for $43,000. What amount of gain or loss should Jacob Inc. record on December 31, 2021?

A) Gain, $22,000.

B) Loss, $18,000.

C) Gain, $5,000.

D) Loss, $3,000.

Answer: C

On January 1, 2020, a company purchased a commercial truck for $48,000 and uses the straight-line depreciation method. The truck has a useful life of eight years and an estimated residual value of $8,000. On December 31, 2022, the company sold the truck for $30,000. What amount of gain or loss should the company record on December 31, 2022?

A) Gain, $22,000.

B) Loss, $18,000.

C) Gain, $5,000.

D) Loss, $3,000.

Answer: D

A company purchased a computer that cost $10,000. It had an estimated useful life of five years and no residual value. The computer was depreciated by the straight-line method

A company purchased a computer that cost $10,000. It had an estimated useful life of five years and no residual value. The computer was depreciated by the straight-line method and was sold at the end of the second year of use for $5,000 cash. The company should record:

A) a loss of $1,000.

B) a gain of $1,000.

C) neither a gain nor a loss—the computer was sold at its book value.

D) neither a gain nor a loss—the gain that occurred in this case would not be recognized.

Answer: A

A company purchased a computer that cost $10,000. It had an estimated useful life of five years and no residual value. The computer was depreciated by the straight-line method and was sold at the end of the fourth year of use for $3,000 cash. The company should record:

A) a gain of $1,000.

B) a loss of $1,000.

C) neither a gain nor a loss—the computer was sold at its book value.

D) neither a gain nor a loss—the gain that occurred in this case would not be recognized.

Answer: A

Equipment was sold for $40,000. The equipment was originally purchased for $75,000. At the time of the sale, the equipment had accumulated depreciation of $50,000. Calculate the gain or loss to be recorded on the sale of equipment.

A) Gain of $10,000.

B) Loss of $15,000.

C) Loss of $35,000.

D) Gain of $15,000.

Answer: D

Equipment was sold for $50,000. The equipment was originally purchased for $85,000. At the time of the sale, the equipment had accumulated depreciation of $30,000

Equipment was sold for $50,000. The equipment was originally purchased for $85,000. At the time of the sale, the equipment had accumulated depreciation of $30,000. Calculate the gain or loss to be recorded on the sale of equipment.

A) Gain of $20,000.

B) Loss of $5,000.

C) Loss of $35,000.

D) Gain of $5,000.

Answer: B

When a company reports a loss on the sale of a depreciable asset, which of the following is always true?

A) The company sold the asset for less than accumulated depreciation.

B) The company sold the asset for less than fair value.

C) The company sold the asset for less than book value.

D) The company sold the asset before the useful life was over.

Answer: C

When a company reports a gain on the sale of a depreciable asset, which of the following is always true?

A) The company sold the asset for more than its fair value.

B) The company sold the asset for more than its book value.

C) The company sold the asset before its useful life was over.

D) The company sold the asset for more than it was worth.

Answer: B

Charco purchased a franchise from Burger Master on January 1, 2021, for $240,000. The franchise agreement allows Charco to sell hamburgers

Charco purchased a franchise from Burger Master on January 1, 2021, for $240,000. The franchise agreement allows Charco to sell hamburgers and other related food items using the Burger Master name for a period of 6 years. Assuming Charco uses the straight-line method, what is the carrying value of the franchise on December 31, 2022?

A) $120,000.

B) $80,000.

C) $240,000.

D) $160,000.

Answer: D

Charco purchased a franchise from Burger Master on January 1, 2021, for $240,000. The franchise agreement allows Charco to sell hamburgers and other related food items using the Burger Master name for a period of six years. Assuming Charco uses the straight-line method, what is the amortization expense for the year ended December 31, 2021?

A) $0.

B) $28,000.

C) $40,000.

D) $240,000.

Answer: C

Berry Co. purchases a patent on January 1, 2021, for $40,000 and the patent has an expected useful life of five years with no residual value. Assuming Berry Co. uses the straight-line method, what is the carrying value of the patent on December 31, 2022?

A) $21,000.

B) $33,000.

C) $24,000.

D) $26,000.

Answer: C

Bricktown Exchange purchases a copyright for $50,000. The copyright has a remaining legal life of 25 years

Bricktown Exchange purchases a copyright for $50,000. The copyright has a remaining legal life of 25 years, but only an expected useful life of five years with no residual value. Assume the company uses the straight-line method to record amortization.
What is the carrying value of the copyright at the end of the second year?

A) $10,000.

B) $40,000.

C) $50,000.

D) $30,000.

Answer: D

Bricktown Exchange purchases a copyright for $50,000. The copyright has a remaining legal life of 25 years, but only an expected useful life of five years with no residual value. Assume the company uses the straight-line method to record amortization.
What is the carrying value of the copyright at the end of the first year?

A) $0.

B) $10,000.

C) $50,000.

D) $40,000.

Answer: D

Berry Co. purchases a patent on January 1, 2021, for $40,000 and the patent has an expected useful life of five years with no residual value. Assuming Berry Co. uses the straight-line method, what is the amortization expense for the year ended December 31, 2022?

A) $0.

B) $8,000.

C) $16,000.

D) $40,000.

Answer: B

Bricktown Exchange purchases a copyright for $50,000. The copyright has a remaining legal life of 25 years,

Bricktown Exchange purchases a copyright for $50,000. The copyright has a remaining legal life of 25 years, but only an expected useful life of five years with no residual value. Assume the company uses the straight-line method to record amortization.
What is the carrying value of the copyright at the end of the first year?

A) $0.

B) $10,000.

C) $50,000.

D) $40,000.

Answer: D

Which of the following statements is true regarding the amortization of intangible assets?

A) The expected residual value of most intangible assets is zero.

B) The service life of an intangible asset is always equal to its legal life.

C) Intangible assets with a limited useful life are not amortized.

D) In recording amortization, an accumulated amortization account is always used.

Answer: A

Which of the following amortization methods is most commonly used?

A) Straight-line.

B) Double-declining-balance.

C) Activity-based.

D) A combination of methods.

Answer: A