19If product X cost 50 and had a 4 percent failure rate the

19If product X cost $50 and had a 4 percent failure rate, the estimated product warranty expense in a month when 1,000 units are sold would be a. $200. b. $50. ?.$20. d. $2,000. 20. Heidi wishes to deposit an amount into her savings account that will enable her to withdraw $800 multiplied by the present value of a single sum factor divided by the present value of a single sum, factor multiplied by the present value of an ordinary annuity factor. divided by the present value of an ordinary annuity factor @ 21. A company purchases land and a building on the land. The land is appraised at $80.000 and the builia .000 Ir the Land account is debited for $101,000, then the total purchase price for the land and building must have been a. $424,000. b. $416,000. c. $400,000. d. $520,000. Lester Company purchases a piece of equipment on Jan. 2, 20x7, for $30,000, The equipment has an estimated life of cight years or 50,000 units of production and an estimated residual value of $3,000 calendar fiscal year. The amount of depreciation to be recorded for 20x7, using the ble-declining-balancomethod, is a. $7,500. b. $5,000. c. $5,500. d. $4,500. disposed of on January 1. Assume that the truck was disposed of for $2,000 cash. The entry to record this event would include a 23. A truck that cost $12,000 and on which $9,000 of accumulated depreciation has been recorded was a. b. c. d. gain of $1,000. loss of $1,000. credit to Accumulated Depreciation for $9,000. credit to the Truck account for $3,000. 24. The cost of a natural resource is expensed in the year during which the resource is a. sold. b. paid for c. extracted d. purchased. UIBE ACC212 Financial Accounting /Geyer/Summer 2018

Solution

19. Warranty expense = (1000*4%)*50 = $ 2,000
d. $2,000

20. Present value annuity factor is used for simplifying the process of calculating the present value of an annuity.
c. multiplied by the present value of an ordinary annuity factor

21. Total purchase price = Value of land + Value of Building = 104000+320000 = $ 424,000
a. $424,000

22. Depreciation (Double declining balance method) = 30000*2*12.5% = $7,500
a. $7,500
Note: Double declining method formula = Book value at the beginning of the year x 2 x Straight line depreciation rate

23. Journal entry for the sale of the truck
Cash A/c Dr. 2000
Accumulated depreciation Dr. 9000
Loss on sale of assets Dr. 1000
Truck Cr. 12000
b. Loss of $1000

24. The cost of natural resource is expensed in the year during which the resource is (c) extracted.