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Depreciation Expense / Cost of new equipment

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____ 1. Barone Supply bought equipment at a cost of $48,000 on January 2, 1997. It originally had an estimated life of ten years and a salvage value of $8,000. Barone uses the straight-line depreciation method. On December 31, 2000, Barone decided the useful life likely would end on December 31, 2004, with a salvage value of $4,000. The depreciation expense recorded on December 31, 2000, should be
a. $4,000.
b. $4,400.
c. $6,400.
d. $8,800.

____ 2. Cepeda Company exchanged old equipment for similar new equipment. The old equipment had a cost of $100,000, accumulated depreciation of $60,000, and a fair market value of $50,000. Cepeda paid an additional $44,000 in cash. The new equipment should be recorded at
a. $90,000.
b. $100,000.
c. $84,000.
d. $94,000.

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Solution Summary

The solution explains how to calculate the amount of depreciation expense and the cost of new equipment.

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1. The orginal depreciation per year is (48,000-8,000)/10 = $4,000. The equipment is used for 3 years from 1997 to 1999. ...

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