7. An asset was acquired on January 1, 2018, for $15,000 with an estimated 4-year life and $1,000 residual value. The company uses straight-line depreciation. Calculate the gain or loss if the asset was sold on December 31, 2020, for $5,000.
a. $500 gain
b. $3,000 loss
c. $1,500 gain
d. $500 loss
8. On January 1, 2018, Tabitha Designs purchased a patent giving it exclusive rights to manufacture a new type of synthetic clothing for $240,000. While the patent had a remaining legal life of 15 years at the time of purchase, Tabitha expects the useful life to be only eight more years. In addition, Tabitha purchase equipment related to production of the new clothing for $140,000. The equipment has a physical life of 10 years but Tabitha plans to use the equipment only over the patentâs service life and then sell it for an estimated $20,000. Tabitha uses straight-line for all long-term assets. The amount to expense in 2021 related to the patent and equipment should be:
a. $40,000
b. $38,000
c. $45,000
d. $31,000
9. Russell Enterprises acquired a franchise from Michael Incorporated for $300,000. The franchise agreement is for a period of six years. Russell uses straight-line to amortize all intangible assets. What would be the reported book value of the franchise two years after the purchase?
a. $300,000
b. $250,000
c. $200,000
d. $100,000
10. Herman Apparel has purchased equipment on January 1, 2015, for $560,000. In 2015-2017, Herman depreciated the asset on a straight-line basis with an estimated useful life of eight years and a $80,000 residual value. In 2018, Herman has started to change its business strategy and now believes that the equipment will be used for only another two years (five years total) but does not believe the residual value has changed. What depreciation would Herman record for the year 2018 on this equipment?
a. $150,000
b. $175,000
c. $124,000
d. $ 96,000
7. An asset was acquired on January 1, 2018, for $15,000 with an estimated 4-year life and $1,000 residual value. The company uses straight-line depreciation. Calculate the gain or loss if the asset was sold on December 31, 2020, for $5,000.
a. $500 gain
b. $3,000 loss
c. $1,500 gain
d. $500 loss
8. On January 1, 2018, Tabitha Designs purchased a patent giving it exclusive rights to manufacture a new type of synthetic clothing for $240,000. While the patent had a remaining legal life of 15 years at the time of purchase, Tabitha expects the useful life to be only eight more years. In addition, Tabitha purchase equipment related to production of the new clothing for $140,000. The equipment has a physical life of 10 years but Tabitha plans to use the equipment only over the patentâs service life and then sell it for an estimated $20,000. Tabitha uses straight-line for all long-term assets. The amount to expense in 2021 related to the patent and equipment should be:
a. $40,000
b. $38,000
c. $45,000
d. $31,000
9. Russell Enterprises acquired a franchise from Michael Incorporated for $300,000. The franchise agreement is for a period of six years. Russell uses straight-line to amortize all intangible assets. What would be the reported book value of the franchise two years after the purchase?
a. $300,000
b. $250,000
c. $200,000
d. $100,000
10. Herman Apparel has purchased equipment on January 1, 2015, for $560,000. In 2015-2017, Herman depreciated the asset on a straight-line basis with an estimated useful life of eight years and a $80,000 residual value. In 2018, Herman has started to change its business strategy and now believes that the equipment will be used for only another two years (five years total) but does not believe the residual value has changed. What depreciation would Herman record for the year 2018 on this equipment?
a. $150,000
b. $175,000
c. $124,000
d. $ 96,000
