1. In 2007, Redford Company paid $1,000,000 to purchase land containing a total
estimated 160,000 tons of extractable mineral deposits. The estimated value of the
property after the mineral has been removed is $200,000. Extraction activities began in
2008, and by the end of the year, 20,000 tons had been recovered and sold. In 2009,
geological studies indicated that the total amount of mineral deposits had been
underestimated by 25,000 tons. During 2009, 30,000 tons were extracted, and 28,000 tons
were sold. What is the depletion rate per ton (rounded to the nearest cent) in 2009?
2. When a company replaces an old asphalt roof on its plant with a new fiberglass
insulated roof, which of the following types of expenditure has occurred?
A. Ordinary repairs and maintenance
3. Post Company’s depreciation policy on machinery and equipment is as follows:
• A full year’s depreciation is taken in the year of an asset’s acquisition.
• No depreciation is taken in the year of an asset’s disposition.
• The estimated useful life is five years.
• The straight-line method is used.
On June 30, 2007, Post sold for $230,000 a machine acquired in 2004 for $420,000. The
accumulated depreciation for this machine was $216,000 at December 31, 2006, and the
original estimated salvage value was $60,000. How much gain or (loss) on the disposal
should Post record in 2007?
A. A $14,000 gain
C. A $26,000 loss
B. A $26,000 gain
D. A $34,000 loss
Book Value of the machine at Dec 31, 2007 = $420,000 - $216,000
Gain on Disposal = $230,000 - $204,000
4. Nimbus Inc., purchased certain plant assets under a deferred payment contract. The
agreement was to pay $30,000 per year for 10 years. The plant assets should be valued at
B. $300,000 plus imputed interest.
C. present value of $30,000 annuity for 10 years at an imputed interest rate.
D. future value of $30,000 annuity for 10 years at an imputed interest rate.
5. On February 12, Laker Company purchased a tract of land as a factory site for