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York University
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all
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Fall

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Statfall Ltd. Buys a building on April 1, 1995 for \$500,000. The building will last for 50 years, but bigger expects to use the building for 30 years. At the end of 50 years the building will have no disposal value, but it is expected to have a \$50,000 disposal value at the end of 30 years. Statfall uses the straight line method depreciation. The depreciation Expense at for the year- ended December 31,2003 is: a) \$7500 b) \$10,000 c) \$15,000 d) \$9000 e) none of the above. Bongo had constructed a small building for \$364,000 on January 1, 1998 . When the building was built it was expected to be used for 8 years and then be sold for \$44,000 . At the beginning of January , 2000, a \$116,000 addition was made to the building so it would be useful until December 31,2009 at which time it is expected to be sold for \$20,000 . The depreciation expense for 2000 will be : a) \$38,000 b) \$40,000 c) \$43,600 d) 32,000 e) none of the above. Allgone Company’s inventory was destroyed by fire. Its records show net sales of \$90,000, beginning inventory of \$20,000, net purchases of \$75,000 and a gross margin rate of 30%. What is the estimated value of the ending inventory lost in the fire?. A) \$158,000 B) \$68,000 C) \$32,000 D) \$75,000 E) None of the above Natalie owns a machine that has a net book value of \$40,000 and a fair market value of \$36,000. The old machine is traded in for a new dissimilar machine (hint: gain/loss recognition appropriate). That has a list price of \$50,000 . In addition to giving up the old machine, Natalis pays \$12,000 in cash. The new machine should be recorded at: a) \$70,000 b) \$48,000 c) \$52,000 d) \$36,000 e) none of the above. The term used to refer to systematic allocation of the original cost of an intangible asset to expense to achieve proper matching in the income statement is: a) depreciation b) depletion c) amortization d) write-off e) none of the above 11. A company makes silly clerical errors and in the annual financial statements for the year ended December 31, 2010 understates it beginning inventory for the year by \$ 5,000 and in the same accounting period overstates its ending inventory by \$9,000 . As a result of these two errors, Cost of Goods Sold reported in the 2010 Income Statement will be : a) understated by \$9,000 b) understated by \$14,000 c) overstated by \$5,000 d) overstated by \$9,000 e) none of the above. 12. If for an entire year prices are falling over time for inventory purchases (i.e. a period of deflation), then the inventory costing method that will produce the highest reported profits that year for a firm that started business that year will be : a) FIFO b) Weighted Average Cost c) Unspecific I
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