test3 - Name: __________________________ Date:...

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Unformatted text preview: Name: __________________________ Date: _____________ Accounting 5312 Test 2 Fall 2006 1. When an accelerated depreciation method is used to calculate depreciation expense: A) the net book value of the asset halfway through its useful life will be less than if straight-line depreciation is used. B) the net book value of the asset at the end of its useful life will be less than if straight-line depreciation is used. C) depreciation expense will be less in the early years of the asset's life than if straight- line depreciation is used. D) the accumulated depreciation account balance will increase by a larger amount in the last half of an asset's life than if straight-line depreciation is used. Use the following to answer questions 2-3: Moped, Inc. purchased machinery at a cost of $22,000 on January 1, 2007. The expected useful life is 5 years and the asset is expected to have salvage value of $2,000. Moped depreciates its assets via the double-declining balance method. 2. What is the accumulated depreciation for this asset on December 31, 2008? A) $ 4,400 B) $ 5,280 C) $ 8,800 D) $14,080 3. What is the firm's gain or loss if the machinery is sold for $11,000 on December 31, 2008? A) Gain of $4,000 B) Gain of $3,080 C) Loss of $600 D) Loss of $4,000 Use the following to answer questions 4-5: Present Value of $1 Present Value of an Annuity of Discount Rate $1 Discount Rate Periods 8% 10% 8% 10% 5 .6806 .6209 3.9927 3.7908 7 .5835 .5132 5.2064 4.8684 9 .5002 .4241 6.2469 5.7590 Page 1 4. A particular common stock has an annual cash dividend of $2.00 per share and is predicted to have a market value of $30 per share 5 years from now. Assuming a discount rate of 10%, a fair market price for the stock today is: A) $20.00 B) $26.21 C) $37.58 D) $56.21 5. Psyche Company wants to acquire Trim Company. Trim's ROI has been above average for its industry; net income has averaged $70,000 a year more than the industry average. These "excess" earnings are expected to continue at this amount for 5 years. Assuming a discount rate of 8%, how much goodwill will arise from Psyches' purchase of Trim? A) $ 40,836 B) $ 88,157 C) $279,489 D) $350,000 6. When a machine having a net book value of $5,000 is sold for $4,000: A) current assets increase, equipment (net) increases, and net income increases. B) current assets increase, equipment (net) decreases, and net income increases. C) current assets increase, equipment (net) decreases, and net income decreases. D) current assets increase, equipment (net) increases, and net income decreases. 7. Which of the following could be a correct journal entry to record the disposition of equipment? A) Dr Accounts payable XXX Cr Accumulate depreciation XXX Cr Depreciation XXX B) Dr Cash XXX Dr Loss on sale of equipment XXX Dr Accumulated depreciation XXX Cr Equipment XXX C) Dr Gain on sale of equipment XXX Dr Accumulated depreciation XXX Cr Equipment XXX D) Dr Cash XXX Dr Loss on sale of equipment XXX Cr Accumulated depreciation XXX Cr...
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This note was uploaded on 06/15/2008 for the course ACC 5312 taught by Professor Na during the Fall '06 term at University of Texas at Austin.

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test3 - Name: __________________________ Date:...

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