Week 11 Quiz

The bicycle shop (illustrative) buys a delivery van. It pays a price of $28,000, $1,500 of freight to have the van delivered, and $500 to set it up to carry bicycles. At what cost does the shop record the van in its Delivery Van account?

Select one.

• $28,000
• $29,500
• $30,000
• $28,500

The bicycle shop (illustrative) records a delivery van at a cost of $30,000, with a residual value of $3,000 and a useful life of 5 years or 90,000 miles. What is the van's straight-line depreciation for one year?

Select one.

• $5,400
• $6,000
• $5,000
• $12,000

The bicycle shop (illustrative) records a delivery van at a cost of $30,000, with a residual value of $3,000 and a useful life of 5 years or 90,000 miles. Under the units-of-production method, what is the van's depreciation in a first year in which it is driven 20,000 miles?

Select one.

• $5,400
• $6,000
• $6,667
• $4,320

The bicycle shop (illustrative) records a delivery van at a cost of $30,000, with a residual value of $3,000 and a useful life of 5 years or 90,000 miles. Under the double-declining-balance method, what is the van's depreciation in Year 1?

Select one.

• $10,800
• $5,400
• $6,000
• $12,000

Under the double-declining-balance method, the bicycle shop's delivery van (illustrative) begins Year 5, the last year of its life, with a book value of $3,888. Its residual value is $3,000, and the method's rate is 40 percent. What is the van's depreciation for Year 5?

Select one.

• $1,555.20
• $5,400
• $888
• $3,888

The bicycle shop (illustrative) depreciates its $30,000 delivery van by straight-line at $5,400 a year. At the end of Year 3 it sells the van for $12,500 in cash. What does the shop record on the sale?

Select one.

• A gain of $12,500
• A loss of $1,300
• A gain of $1,300
• A loss of $16,200

True or false: the $5,400 of depreciation the bicycle shop (illustrative) records on its delivery van each year measures how much the van's market value fell that year.

True or false.

• True
• False

At the end of each year, the bicycle shop (illustrative) records $5,400 of straight-line depreciation on its delivery van. Which adjusting entry records it?

Select one.

• Debit Depreciation Expense 5,400; credit Accumulated Depreciation 5,400
• Debit Depreciation Expense 5,400; credit Cash 5,400
• Debit Accumulated Depreciation 5,400; credit Depreciation Expense 5,400
• Debit Delivery Van 5,400; credit Accumulated Depreciation 5,400

Which statements about intangible assets and natural resources are true under the general GAAP rule? Select all that apply.

Select every option that applies.

• A patent with a finite useful life is amortized over that life.
• Goodwill is not amortized, though private companies and not-for-profit entities may elect to amortize it.
• A natural resource is depleted as its units are taken out.
• Every company must amortize goodwill over a fixed number of years.
• A patent is never expensed, because it has no physical form.

The bicycle shop (illustrative) pays $30,000 for a delivery van it expects to use for 5 years. Why does the shop record depreciation each year instead of recording the full $30,000 as an expense in the year it buys the van?

Select one.

• Because the van's market value falls by the same amount each year
• Because the shop pays for the van in five yearly installments
• Because the cash for the van leaves the bank a little each year
• Because the van's cost is matched to the years the van helps earn revenue