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# Depreciation Expense / Cost of new equipment

____ 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.

#### Solution Preview

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. ...

#### Solution Summary

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

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