### Costs And Equipment Account – Final Exam – Accounting & Finance

The key terms in these accounting chapters include Equipment Account, Perpetual Inventory, Useful Life, Depreciation, Salvage Value, Costs, Final Exam – Accounting & Finance

On January 1, 2019, Pete Company purchases manufacturing equipment for \$120,000.  Installation and delivery costs totaled \$8,000.  Yearly maintenance costs on the equipment are expected to be \$6,000.  The expected useful life is 8 years with a salvage value of \$12,000.

What amount should Pete Company have in its equipment account after the purchase?

128,000

On February 3, Smart Company sold merchandise in the amount of \$4,500 to Truman Company, with credit terms of 1/10, n/30. The cost of the items sold is \$3,100. Smart uses the perpetual inventory system and the gross method. Truman pays the invoice on February 8, and takes the appropriate discount. The journal entry that Smart makes on February 8 is:

Correct

##### Explanation

Sales Discounts = \$4,500 * .01 = \$45
Cash = \$4,500 – \$45 = \$4,455

On January 1, 2019, Pete Company purchases manufacturing equipment for \$120,000.  Installation and delivery costs totaled \$8,000.  Yearly maintenance costs on the equipment are expected to be \$6,000.  The expected useful life is 8 years with a salvage value of \$12,000.

What amount of depreciation expense would Pete Company record in 2019?

14,500

A company had beginning inventory of 11 units at a cost of \$23 each on March 1. On March 2, it purchased 11 units at \$40 each. March 6 it purchased 5 units at \$28 each. On March 8, it sold 25 units for \$71 each. Using the FIFO perpetual inventory method, what was the cost of the 25 units sold?

\$833

\$621

\$693

\$700

\$777 – Correct

##### Explanation

(11 * \$23) + (11 * \$40) + (3 * \$28) = \$777

On January 1, 2019, Pete Company purchases manufacturing equipment for \$120,000.  Installation and delivery costs totaled \$8,000.  Yearly maintenance costs on the equipment are expected to be \$6,000.  The expected useful life is 8 years with a salvage value of \$12,000.

What amount of accumulated depreciation expense would Pete Company report on its December 31, 2021 balance sheet?

35,500

In the process of reconciling its bank statement for April, Donahue Enterprises’ accountant compiles the following information:

The adjusted cash balance per the books on April 30 is:

\$6,920

\$5,800

\$4,400

\$8,120

\$6,400 – Correct

##### Explanation

On January 1, 2019, Pete Company purchases manufacturing equipment for \$120,000.  Installation and delivery costs totaled \$8,000.  Yearly maintenance costs on the equipment are expected to be \$6,000.  The expected useful life is 8 years with a salvage value of \$12,000.

What is the book value of the equipment on December 31, 2023?

55,500

The interest accrued on \$3,600 at 7% for 30 days is: (Use 360 days a year.)

\$126.

\$25.

\$294.

\$21.  Correct

\$29.

##### Explanation

\$3,600 × 0.07 × 30/360 = \$21

On January 1, 2019, Pete Company purchases manufacturing equipment for \$120,000.  Installation and delivery costs totaled \$8,000.  Yearly maintenance costs on the equipment are expected to be \$6,000.  The expected useful life is 8 years with a salvage value of \$12,000.

What amount of gain or loss would Pete Company record if it sold the equipment for \$36,000 on January 1, 2025?

(Enter a gain as a positive number and a loss as a negative number.)

-5,000

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