Comprehensive Exam C
Use the following data to answer questions 5 through 9:
Davis Company purchased a new piece of equipment on July 1, 2012 at a cost of
$1,080,000. The equipment has an estimated useful life of 5 years and an estimated
salvage value of $90,000. The current year end is 12/31/13. Davis records depreciation
to the nearest month.
_____ 5.
What is straight-line depreciation for 2013?
a.
$99,000.
b.
$108,000.
c.
$198,000.
d.
$216,000.
_____ 6.
What is sum-of-the-years'-digits depreciation for 2013?
a.
$263,999.
b.
$947,000.
c.
$324,000.
d.
$330,000.
_____ 7.
What is double-declining-balance depreciation for 2013?
a.
$2,59,200.
b.
$345,600.
c.
$396,000.
d.
$432,000.
_____ 8.
If Davis expensed the total cost of the equipment at 7/1/12, what was the
effect on 2012 and 2013 income before taxes, assuming Davis uses straight-
line depreciation?
a.
$882,000 understated and $198,000 overstated.
b.
$972,000 understated and $108,000 overstated.
c.
$981,000 understated and $198,000 overstated.
d.
$1,080,000 understated and $108,000 overstated.
_____ 9.
If, at the end of 2014, Davis Company decides the equipment still has five
more years of life beyond 12/31/14, with a salvage value of $90,000, what is
straight-line depreciation for 2014? (Assume straight-line used in all years.)
a.
$108,000.
b.
$115,500.
c.
$130,500.
d.
$198,000.
C-2