Question Details

Amortization expense each year using the straight-line method 


1.	Equipment was purchased for $15,000.  Freight charges amounted to $700, and there was a cost of $2,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $3,000 residual value at the end of its 5-year useful life.  Amortization expense each year using the straight-line method will be
		a.	$3,540.
		b.	$2,940.
		c.	$2,460.
		d.	$2,400.

	2.	A truck was purchased for $15,000, and it was estimated to have a $3,000 residual value at the end of its useful life. Monthly amortization expense of $250 was recorded using the straight-line method. The annual amortization rate is
		a.	20%.
		b.	2%.
		c.	8%.
		d.	25%.

	3.	A company purchased factory equipment on April 1, 2001 for $48,000. It is estimated that the equipment will have a $6,000 residual value at the end of its 10-year useful life.  Using the straight-line method of amortization, the amount to be recorded as amortization expense at December 31, 2001 is
		a.	$4,800.
		b.	$4,200.
		c.	$3,150.
		d.	$3,600.

	4.	A company purchased office equipment for $10,000 and estimated a residual value of $2,000 at the end of its 4-year useful life.  The constant percentage to be applied against book value each year if the doubledeclining-balance method is used is
		a.	20%.
		b.	25%.
		c.	50%.
		d.	4%.

	5.	The declining-balance method of amortization produces
		a.	a decreasing amortization expense each period.
		b.	an increasing amortization expense each period.
		c.	a declining percentage rate each period.
		d.	a constant amount of amortization expense each period.




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