PRINCIPLE OF ACCOUNTING

Final Exam, Set B

注 意 事 项

(i) 本时段考试时长为 22 分钟，请自行预留填写、上传答案的时间。

(ii) 学号尾数为单（双）数的考生请打开试题 A（B），并前往指定的提交页面
作答。请确保答案与题号相符。
(iii) 严禁作弊，包括使用通信设备收发答案、替考、代考等等。发现答案雷同、
提交 IP 异常的，课程成绩以零分计，并上报学校。
(iv) 晚交、错交，以及在指定问卷星链接以外提交的答案作废。

Question 2

Xue owns and operates Xue Inc. On January 1, 2016, the business purchased new
equipment for $40,000. In addition, she paid $5,000 for the replacement of several
components of the new equipment. At that time, it was estimated that the equipment
would have a useful life of four years. The estimated residual value is expected to be
$5,000.

At the time of the purchase, Xue already owned another piece of equipment (old
equipment) that had been purchased 3 years before at a historical cost of $90,000 (no
residual value). Xue applies the straight-line method to depreciate this equipment.

Required:

(a) Compute the depreciation expenses for the new equipment for the years 2016 to
2019 under both straight-line and double-declining balance methods.

Straight-line Double-declining balance

2016 ___(1)___ ___(2)___
2017 ___(1)___ ___(3)___
2018 ___(1)___ ___(4)___
2019 ___(1)___ ___(5)___
(6) Which method will generate a higher net income in 2017?
(7) Which method will generate a higher cash flow in 2018?

(b) Provide the adjusting entry for the depreciation expense of the new equipment at the
end of 2019 using the double-declining balance method:
Accounts Debits Credits
___(8)___ ___(10)___
___(9)___ ___(10)___
 (c) Suppose Xue also uses the straight-line method to evaluate the new equipment. At
the end of 2017, Xue reported accumulated depreciation (for both pieces of equipment)
totaling $50,000. Compute the following amounts.
Total estimated useful life of the old equipment ___(11)___ (in years)
Total depreciation expense for 2018 (for both pieces ___(12)___
of equipment)
Accumulated depreciation at the end of 2018 (for both ___(13)___
pieces of equipment)
Net book value at the end of 2018 (for both pieces of ___(14)___
equipment)

(d) Suppose at the end of 2018, Xue Inc. sold the old equipment to a smaller company
for $26,000. Prepare the journal entry to record Xue’s sale of the old equipment. The
assumptions are the same as in (c).

Accounts Debits Credits

Cash ___(17)___
___(15)___ ___(18)___
___(16)___ ___(19)___
Equipment ___(20)___