U2 CPA Questions

# U2 CPA Questions - CPA Review Questions 1 Slovac Company...

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CPA Review Questions: 1. Slovac Company purchased a machine that has an estimated useful life of eight years for \$7,500. Its salvage value is estimated at \$500. What is the depreciation for the second year of the asset's life, assuming Slovac uses the double- declining balance method of depreciation? a. \$1,406 b. \$1,438 c. \$1,875 d. \$3,750 Solution: Double declining balance depreciation rate = 2 x 1/8 = ¼ or 25% First year deprecation will be \$7,500 x 0.25 = \$1,875 Second year deprecation will be (\$7,500 - \$1875) x 0.25 = \$1,406

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2. Calculate depreciation for year 2 based on the following information Historical cost \$40,000 Useful life 5 years Salvage value \$3,000 Year 1 depreciation \$7,400 a. \$7,000 b. \$7,400 c. \$8,000 d. \$8,600 Solution: Computation of the depreciation using straight line method Depreciation expenses = Asset Value - Salvage Life of Asset Where as Asset Value \$40,000 Life of Asset 5 Salvage \$3,000 Depreciation expenses = \$37,000 5 Depreciation expenses = \$7,400 4. Black, Inc.,
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## This note was uploaded on 02/29/2012 for the course INTERMEDIA 301 taught by Professor ?? during the Spring '12 term at Post.

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U2 CPA Questions - CPA Review Questions 1 Slovac Company...

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