Problem 9d: Reporting Property, Plant, & Equipment
1. Mike Kerver founded Kerver Products on November 1. During its first year the
company had sales of $400,000, cost of goods sold of $205,000, and operating
expenses (not including depreciation) of $90,000. The company estimates its income
taxes expense will be approximately 35% of income before taxes. The company's
equipment, all of which was purchased on November 1, cost $150,000, with an
estimated residual or salvage value of $20,000, and a useful life of ten years.
Assuming that Kerver Products uses the straight-line depreciation method, calculate
the company’s gross profit for its first year ended October 30.
A)
B)
C)
D)
E)
$400,000
$205,000
$195,000
$605,000
$59,800
2. During its first year the company had sales of $400,000, cost of goods sold of
$205,000, and operating expenses (not including depreciation) of $90,000. The
company estimates its income taxes expense will be approximately 35% of income
before taxes. The company's equipment, all of which was purchased on November 1,
cost $150,000, with an estimated residual or salvage value of $20,000, and a useful
life of ten years.
Assuming that Kerver Products uses the straight-line depreciation method, calculate
the company’s depreciation expense for its first year ended October 30.
A)
B)
C)
D)
E)
$15,000
$30,000
$26,000
$1,083
$13,000
2
3. During its first year the company had sales of $400,000, cost of goods sold of
$205,000, and operating expenses (not including depreciation) of $90,000. The
company estimates its income taxes expense will be approximately 35% of income
before taxes. The company's equipment, all of which was purchased on November 1,
cost $150,000, with an estimated residual or salvage value of $20,000, and a useful
life of ten years.
Assuming that Kerver Products uses the straight-line depreciation method, calculate
the company’s total operating expenses for its first year ended October 30.
A)
B)
C)
D)
E)
$90,000
$103,000
$105,000
$120,000
$116,000
4. During its first year the company had sales of $400,000, cost of goods sold of
$205,000, and operating expenses (not including depreciation) of $90,000. The
company estimates its income taxes expense will be approximately 35% of income
before taxes. The company's equipment, all of which was purchased on November 1,
cost $150,000, with an estimated residual or salvage value of $20,000, and a useful
life of ten years.
Assuming that Kerver Products uses the straight-line depreciation method, calculate
the company’s income before taxes for its first year ended October 30.
A)
B)
C)
D)
E)
$92,000
$75,000
$298,000
$105,000
$79,000
3
5. During its first year the company had sales of $400,000, cost of goods sold of
$205,000, and operating expenses (not including depreciation) of $90,000. The
company estimates its income taxes expense will be approximately 35% of income
before taxes. The company's equipment, all of which was purchased on November 1,
cost $150,000, with an estimated residual or salvage value of $20,000, and a useful
life of ten years.
Assuming that Kerver Products uses the straight-line depreciation method, calculate
the company’s income taxes expense for its first year ended October 30.
A)
B)
C)
D)
E)
$26,250
$59,800
$48,750
$32,200
$140,000
6. During its first year the company had sales of $400,000, cost of goods sold of
$205,000, and operating expenses (not including depreciation) of $90,000. The
company estimates its income taxes expense will be approximately 35% of income
before taxes. The company's equipment, all of which was purchased on November 1,
cost $150,000, with an estimated residual or salvage value of $20,000, and a useful
life of ten years.
Assuming that Kerver Products uses the straight-line depreciation method, calculate
the company’s net income for its first year ended October 30.
A)
B)
C)
D)
E)
$59,800
$48,750
$124,200
$101,250
$400,000
4
7. The company's equipment, all of which was purchased on November 1, cost
$150,000, with an estimated residual or salvage value of $20,000, and a useful life of
ten years.
Assuming that Kerver Products uses the straight-line depreciation method, calculate
the dollar amount reported in the company’s general ledger equipment account at the
end of its first year ended October 30.
A)
B)
C)
D)
E)
$137,000
$163,000
$150,000
$120,000
$180,000
8. The company's equipment, all of which was purchased on November 1, cost
$150,000, with an estimated residual or salvage value of $20,000, and a useful life of
ten years.
Assuming that Kerver Products uses the straight-line depreciation method, calculate
the dollar amount reported in the company’s general ledger accumulated depreciation,
equipment account at the end of its first year ended October 30.
A)
B)
C)
D)
E)
$30,000
$137,000
$120,000
$15,000
$13,000
9. The company's equipment, all of which was purchased on November 1, cost
$150,000, with an estimated residual or salvage value of $20,000, and a useful life of
ten years.
Assuming that Kerver Products uses the straight-line depreciation method, calculate
the dollar amount reported in the company’s general ledger equipment account at the
end of its second year ended October 30.
A)
B)
C)
D)
E)
$180,000
$137,000
$163,000
$150,000
$120,000
5
10. The company's equipment, all of which was purchased on November 1, cost
$150,000, with an estimated residual or salvage value of $20,000, and a useful life of
ten years.
Assuming that Kerver Products uses the straight-line depreciation method, calculate
the dollar amount reported in the company’s general ledger accumulated depreciation,
equipment account at the end of its second year ended October 30.
A)
B)
C)
D)
E)
$13,000
$26,000
$30,000
$54,000
$60,000
11. Mike Kerver founded Kerver Products on November 1. During its first year the
company had sales of $400,000, cost of goods sold of $205,000, and operating
expenses (not including depreciation) of $90,000. The company estimates its income
taxes expense will be approximately 35% of income before taxes. The company's
equipment, all of which was purchased on November 1, cost $150,000, with an
estimated residual or salvage value of $20,000, and a useful life of ten years.
Assuming that Kerver Products uses the double-declining-balance depreciation
method, calculate the company’s gross profit for its first year ended October 30.
A)
B)
C)
D)
E)
$400,000
$205,000
$59,800
$605,000
$195,000
6
12. During its first year the company had sales of $400,000, cost of goods sold of
$205,000, and operating expenses (not including depreciation) of $90,000. The
company estimates its income taxes expense will be approximately 35% of income
before taxes. The company's equipment, all of which was purchased on November 1,
cost $150,000, with an estimated residual or salvage value of $20,000, and a useful
life of ten years.
Assuming that Kerver Products uses the double-declining-balance depreciation
method, calculate the company’s depreciation expense for its first year ended October
30.
A)
B)
C)
D)
E)
$15,000
$30,000
$26,000
$1,083
$13,000
13. During its first year the company had sales of $400,000, cost of goods sold of
$205,000, and operating expenses (not including depreciation) of $90,000. The
company estimates its income taxes expense will be approximately 35% of income
before taxes. The company's equipment, all of which was purchased on November 1,
cost $150,000, with an estimated residual or salvage value of $20,000, and a useful
life of ten years.
Assuming that Kerver Products uses the double-declining-balance depreciation
method, calculate the company’s total operating expenses for its first year ended
October 30.
A)
B)
C)
D)
E)
$90,000
$103,000
$105,000
$120,000
$116,000
7
14. During its first year the company had sales of $400,000, cost of goods sold of
$205,000, and operating expenses (not including depreciation) of $90,000. The
company estimates its income taxes expense will be approximately 35% of income
before taxes. The company's equipment, all of which was purchased on November 1,
cost $150,000, with an estimated residual or salvage value of $20,000, and a useful
life of ten years.
Assuming that Kerver Products uses the double-declining-balance depreciation
method, calculate the company’s income before taxes for its first year ended October
30.
A)
B)
C)
D)
E)
$298,000
$92,000
$75,000
$105,000
$79,000
15. During its first year the company had sales of $400,000, cost of goods sold of
$205,000, and operating expenses (not including depreciation) of $90,000. The
company estimates its income taxes expense will be approximately 35% of income
before taxes. The company's equipment, all of which was purchased on November 1,
cost $150,000, with an estimated residual or salvage value of $20,000, and a useful
life of ten years.
Assuming that Kerver Products uses the double-declining-balance depreciation
method, calculate the company’s income taxes expense for its first year ended
October 30.
A)
B)
C)
D)
E)
$26,250
$59,800
$48,750
$32,200
$140,000
8
16. During its first year the company had sales of $400,000, cost of goods sold of
$205,000, and operating expenses (not including depreciation) of $90,000. The
company estimates its income taxes expense will be approximately 35% of income
before taxes. The company's equipment, all of which was purchased on November 1,
cost $150,000, with an estimated residual or salvage value of $20,000, and a useful
life of ten years.
Assuming that Kerver Products uses the double-declining-balance depreciation
method, calculate the company’s net income for its first year ended October 30.
A)
B)
C)
D)
E)
$59,800
$48,750
$124,200
$101,250
$400,000
17. The company's equipment, all of which was purchased on November 1, cost
$150,000, with an estimated residual or salvage value of $20,000, and a useful life of
ten years.
Assuming that Kerver Products uses the double-declining-balance depreciation
method, calculate the dollar amount reported in the company’s general ledger
equipment account at the end of its first year ended October 30.
A)
B)
C)
D)
E)
$137,000
$163,000
$120,000
$150,000
$180,000
9
18. The company's equipment, all of which was purchased on November 1, cost
$150,000, with an estimated residual or salvage value of $20,000, and a useful life of
ten years.
Assuming that Kerver Products uses the double-declining-balance depreciation
method, calculate the dollar amount reported in the company’s general ledger
accumulated depreciation, equipment account at the end of its first year ended
October 30.
A)
B)
C)
D)
E)
$30,000
$137,000
$120,000
$15,000
$13,000
19. The company's equipment, all of which was purchased on November 1, cost
$150,000, with an estimated residual or salvage value of $20,000, and a useful life of
ten years.
Assuming that Kerver Products uses the double-declining-balance depreciation
method, calculate the dollar amount reported in the company’s general ledger
equipment account at the end of its second year ended October 30.
A)
B)
C)
D)
E)
$180,000
$137,000
$150,000
$163,000
$120,000
10
20. The company's equipment, all of which was purchased on November 1, cost
$150,000, with an estimated residual or salvage value of $20,000, and a useful life of
ten years.
Assuming that Kerver Products uses the double-declining-balance depreciation
method, calculate the dollar amount reported in the company’s general ledger
accumulated depreciation, equipment account at the end of its second year ended
October 30.
A)
B)
C)
D)
E)
$13,000
$26,000
$30,000
$60,000
$54,000
11
21. Kerver Products income statements for its third year ended October 30 using the straight-line and
double-declining-balance depreciation methods would appear as follows. How much more cash
would Kerver Products have available on October 31 if it uses the double-declining balance
depreciation method instead of the straight-line method? To simplify your work in calculating
your answer, consider the company’s third year only. Do not include any prior years in your
analysis.
Kerver Products
Income Statements
For the Year Ended December 31
Straightline
DoubleDecliningBalance
Sales
Cost of Goods Sold
$500,000
$280,000
$500,000
$280,000
Gross Profit
Operating Expenses
Other than depreciation
Depreciation Expense
$220,000
$220,000
$120,000
$13,000
$120,000
$19,200
Total Operating Expenses
$133,000
$139,200
Income Before Taxes
$87,000
$80,800
Income Taxes Expense
$30,450
$28,280
Net Income
$56,550
$52,520
A)
B)
C)
D)
E)
$4,030
$0
$6,200
$2,170
- $4,030