Question 1

The straight-line depreciation method and the double-declining-balance depreciation method:

Accepted Answer

A) Are the only acceptable methods of depreciation for financial reporting. 
B) Produce the same total depreciation over an asset's useful life. 
C) Produce the same depreciation expense each year. 
D) Are acceptable for tax purposes only. 
E) Produce the same book value each year. 
A) Are the only acceptable methods of depreciation for financial reporting. 
B) Produce the same total depreciation over an asset's useful life. 
C) Produce the same depreciation expense each year. 
D) Are acceptable for tax purposes only. 
E) Produce the same book value each year. B

Question 2

Explain the impact, if any, on depreciation when estimates that determine depreciation change.

Accepted Answer

Depreciation is revised when changes in estimates such as salvage value and useful life occur. If the asset's useful life and/or salvage value changes, the remaining depreciable cost is allocated over the remaining revised useful life of the asset. The new estimate is used to compute depreciation for current and future periods.

Question 3

Marks Consulting purchased equipment costing $45,000 on January 1, Year 1. The equipment is estimated to have a salvage value of $5,000 and an estimated useful life of 8 years. Straight-line depreciation is used. If the equipment is sold on July 1, Year 5 for $20,000, the journal entry to record the sale will include a:

Accepted Answer

A) Debit to accumulated depreciation for $22,500. 
B) Credit to loss on sale for $10,000. 
C) Credit to cash for $20,000. 
D) Debit to loss on sale for $10,000. 
E) Debit to gain on sale for $2,500. 
A) Debit to accumulated depreciation for $22,500. 
B) Credit to loss on sale for $10,000. 
C) Credit to cash for $20,000. 
D) Debit to loss on sale for $10,000. 
E) Debit to gain on sale for $2,500. A

Question 4

The depreciation method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called:

Accepted Answer

A) Accelerated depreciation. 
B) Modified accelerated cost recovery system (MACRS)depreciation. 
C) Units-of-production depreciation. 
D) Straight-line depreciation. 
E) Declining-balance depreciation. 
A) Accelerated depreciation. 
B) Modified accelerated cost recovery system (MACRS)depreciation. 
C) Units-of-production depreciation. 
D) Straight-line depreciation. 
E) Declining-balance depreciation.

Question 5

A company purchased a delivery van for $28,000 with a salvage value of $3,000 on September 1, Year 1. It has an estimated useful life of 5 years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, Year 1?

Accepted Answer

A) $1,667. 
B) $1,400. 
C) $2,067. 
D) $1,250. 
E) $5,000. 
A) $1,667. 
B) $1,400. 
C) $2,067. 
D) $1,250. 
E) $5,000.

Question 6

Depreciation expense is calculated using its cost, estimates of an asset's salvage value, and an estimated useful life.

Accepted Answer

A) True 
 B)False

Question 7

The purchase of a property that included land, building, and related improvements is called a lump-sum or basket purchase.

Accepted Answer

A) True 
 B)False

Question 8

Depreciation:

Accepted Answer

A) Measures the decline in market value of an asset. 
B) Measures physical deterioration of an asset. 
C) Is the process of allocating the cost of a plant asset to expense. 
D) Is applied to land. 
E) Is an outflow of cash from the use of a plant asset. 
A) Measures the decline in market value of an asset. 
B) Measures physical deterioration of an asset. 
C) Is the process of allocating the cost of a plant asset to expense. 
D) Is applied to land. 
E) Is an outflow of cash from the use of a plant asset.

Question 9

Bering Rock acquires a granite quarry at a cost of $590,000, which is estimated to contain 200,000 tons of granite and is expected to take 6 years to remove. What journal entry would be needed to record the expense for the first year assuming 38,000 tons were removed and sold?

Accepted Answer

A) Debit Depletion Expense $112,100; credit Accumulated Depletion $112,100. 
B) Debit Amortization Expense $112,100; credit Natural Resources $112,100. 
C) Debit Depletion Expense $93,158; credit Accumulated Depletion $93,158. 
D) Debit Depreciation Expense $93,158; credit Accumulated Depreciation $93,158. 
E) Debit Depreciation Expense $98,333; credit Accumulated Depreciation $98,333. 
A) Debit Depletion Expense $112,100; credit Accumulated Depletion $112,100. 
B) Debit Amortization Expense $112,100; credit Natural Resources $112,100. 
C) Debit Depletion Expense $93,158; credit Accumulated Depletion $93,158. 
D) Debit Depreciation Expense $93,158; credit Accumulated Depreciation $93,158. 
E) Debit Depreciation Expense $98,333; credit Accumulated Depreciation $98,333.

Question 10

A change in an accounting estimate is:

Accepted Answer

A) Reflected in future financial statements and also requires modification of past statements. 
B) Not allowed under current accounting rules. 
C) Reflected in current and future years' financial statements, not in prior statements. 
D) Considered an error in the financial statements. 
E) Reflected in past financial statements. 
A) Reflected in future financial statements and also requires modification of past statements. 
B) Not allowed under current accounting rules. 
C) Reflected in current and future years' financial statements, not in prior statements. 
D) Considered an error in the financial statements. 
E) Reflected in past financial statements.

Question 11

Extraordinary repairs:

Accepted Answer

A) Are revenue expenditures. 
B) Are expensed when incurred. 
C) Extend the useful life of an asset beyond its original estimate. 
D) Are additional costs of plants assets that do not materially increase the asset's life. 
E) Are credited to accumulated depreciation. 
A) Are revenue expenditures. 
B) Are expensed when incurred. 
C) Extend the useful life of an asset beyond its original estimate. 
D) Are additional costs of plants assets that do not materially increase the asset's life. 
E) Are credited to accumulated depreciation.

Question 12

Total depreciation expense over an asset's useful life will be identical under all methods of depreciation.

Accepted Answer

A) True 
 B)False

Question 13

The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

Accepted Answer

A) Units-of-production depreciation. 
B) Modified accelerated cost recovery system (MACRS)depreciation. 
C) Accelerated depreciation. 
D) Declining-balance depreciation. 
E) Straight-line depreciation. 
A) Units-of-production depreciation. 
B) Modified accelerated cost recovery system (MACRS)depreciation. 
C) Accelerated depreciation. 
D) Declining-balance depreciation. 
E) Straight-line depreciation.

Question 14

Obsolescence refers to the insufficient capacity of a company's plant assets to meet the company's growing productive demands.

Accepted Answer

A) True 
 B)False

Question 15

Betterments are:

Accepted Answer

A) Revenue expenditures. 
B) Expenditures making a plant asset more efficient or productive. 
C) Credited against the asset account when incurred. 
D) Also called ordinary repairs. 
E) Always increase an asset's life. 
A) Revenue expenditures. 
B) Expenditures making a plant asset more efficient or productive. 
C) Credited against the asset account when incurred. 
D) Also called ordinary repairs. 
E) Always increase an asset's life.

Question 16

When the usefulness of plant assets used to extract natural resources is directly related to the depletion of a natural resource, their costs are depreciated using the units-of-production method of depreciation, as long as the assets will not be moved to and used at another site when extraction of the natural resources is complete.

Accepted Answer

A) True 
 B)False

Question 17

No gain or loss is recorded for exchanges of plant assets without commercial substance.

Accepted Answer

A) True 
 B)False

Question 18

When originally purchased, a vehicle costing $23,000 had an estimated useful life of 8 years and an estimated salvage value of $3,000. After 4 years of straight-line depreciation, the asset's total estimated useful life was revised from 8 years to 6 years and there was no change in the estimated salvage value. The depreciation expense in year 5 equals:

Accepted Answer

A) $11,500. 
B) $2,875. 
C) $5,000. 
D) $2,500. 
E) $5,750. 
A) $11,500. 
B) $2,875. 
C) $5,000. 
D) $2,500. 
E) $5,750.

Question 19

Extraordinary repairs are expenditures extending the asset's useful life beyond its original estimate, and are capital expenditures because they benefit future periods.

Accepted Answer

A) True 
 B)False

Question 20

The units-of-production method of depreciation charges a varying amount of expense for each period of an asset's useful life depending on its usage.

Accepted Answer

A) True 
 B)False

The straight-line depreciation method and the double-declining-balance depreciation method:

Explain the impact, if any, on depreciation when estimates that determine depreciation change.

The depreciation method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called:

A company purchased a delivery van for $28,000 with a salvage value of $3,000 on September 1, Year 1. It has an estimated useful life of 5 years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, Year 1?

Depreciation expense is calculated using its cost, estimates of an asset's salvage value, and an estimated useful life.

The purchase of a property that included land, building, and related improvements is called a lump-sum or basket purchase.

Depreciation:

Bering Rock acquires a granite quarry at a cost of $590,000, which is estimated to contain 200,000 tons of granite and is expected to take 6 years to remove. What journal entry would be needed to record the expense for the first year assuming 38,000 tons were removed and sold?

A change in an accounting estimate is:

Extraordinary repairs:

Total depreciation expense over an asset's useful life will be identical under all methods of depreciation.

The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

Obsolescence refers to the insufficient capacity of a company's plant assets to meet the company's growing productive demands.

Betterments are:

No gain or loss is recorded for exchanges of plant assets without commercial substance.

Extraordinary repairs are expenditures extending the asset's useful life beyond its original estimate, and are capital expenditures because they benefit future periods.

The units-of-production method of depreciation charges a varying amount of expense for each period of an asset's useful life depending on its usage.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

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Exam 10: Plant Assets, Natural Resoures, and Intangibles

The straight-line depreciation method and the double-declining-balance depreciation method:

Explain the impact, if any, on depreciation when estimates that determine depreciation change.

The depreciation method that allocates an equal portion of the total depreciable cost for a plant asset to each unit produced is called:

A company purchased a delivery van for $28,000 with a salvage value of $3,000 on September 1, Year 1. It has an estimated useful life of 5 years. Using the straight-line method, how much depreciation expense should the company recognize on December 31, Year 1?

Depreciation expense is calculated using its cost, estimates of an asset's salvage value, and an estimated useful life.

The purchase of a property that included land, building, and related improvements is called a lump-sum or basket purchase.

Depreciation:

Bering Rock acquires a granite quarry at a cost of $590,000, which is estimated to contain 200,000 tons of granite and is expected to take 6 years to remove. What journal entry would be needed to record the expense for the first year assuming 38,000 tons were removed and sold?

A change in an accounting estimate is:

Extraordinary repairs:

Total depreciation expense over an asset's useful life will be identical under all methods of depreciation.

The depreciation method that charges the same amount of expense to each period of the asset's useful life is called:

Obsolescence refers to the insufficient capacity of a company's plant assets to meet the company's growing productive demands.

Betterments are:

No gain or loss is recorded for exchanges of plant assets without commercial substance.

Extraordinary repairs are expenditures extending the asset's useful life beyond its original estimate, and are capital expenditures because they benefit future periods.

The units-of-production method of depreciation charges a varying amount of expense for each period of an asset's useful life depending on its usage.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Filters