Question 1

If the double-declining balance method were used to depreciate a building that has a 10-year useful life and a residual value equal to 10% of the building's original cost,what depreciation rate would be used?

Accepted Answer

A) 9% 
B) 10% 
C) 18% 
D) 20%

Question 2

Which of the following statements is true?

Accepted Answer

A) Depreciation allocates the cost of tangible assets over their useful lives. 
B) Depreciation allocates the cost of intangible assets over their useful lives. 
C) Amortization allocates the cost of tangible assets over their useful lives. 
D) The term "depreciation" relates to all long-lived assets whereas "amortization" relates only to intangible assets.

Question 3

A company buys a piece of equipment for $48,000.The equipment has a useful life of ten years.Using the double-declining-balance method,the company's depreciation expense in the first year would be:

Accepted Answer

A) $9,600. 
B) $12,000. 
C) $4,800. 
D) $24,000.

Question 4

The allocation method used for natural resources is similar to which of the following depreciation methods?

Accepted Answer

A) Straight-line. 
B) Units-of-production. 
C) Double-declining balance. 
D) MACRS.

Question 5

A loss on disposal of an asset would be reported:

Accepted Answer

A) in the Operating Revenues section of the income statement. 
B) in the Operating Expenses section of the income statement. 
C) as a direct increase to the asset account on the balance sheet. 
D) as a direct decrease to the asset account on the balance sheet.

Question 6

When assets are purchased as a group,the total cost must be divided up and allocated to each asset in proportion to the market value of the assets as a whole.

Accepted Answer

A) True 
 B)False

Question 7

How does an asset impairment loss impact a company's financial statements?

Accepted Answer

A) Raises expenses and lowers both revenue and net income. 
B) Lowers assets,stockholders' equity,and net income. 
C) Raises expenses and lowers net income with no effect on any other items. 
D) Raises liabilities and lowers stockholders' equity.

Question 8

A company bought a piece of equipment for $40,000,expecting to use it for eight years.The company then plans to sell it for $3,500.The company has already recorded depreciation of $35,995.Using the double-declining-balance method,the company's annual depreciation expense for the upcoming year would be:

Accepted Answer

A) $1,001. 
B) $9,125. 
C) $505. 
D) $10,000.

Question 9

Which of the following is not the same as book value?

Accepted Answer

A) Carrying value. 
B) Cost - accumulated depreciation. 
C) Unused cost. 
D) Market value.

Question 10

Use the information above to answer the following question.What is the depreciation expense for the first year using the double-declining-balance method?

Accepted Answer

A) $52,800. 
B) $57,600. 
C) $53,000 
D) $55,200.

Question 11

When originally purchased,a vehicle had an estimated useful life of 8 years.The vehicle cost $25,000 and its estimated residual value is $3,000.After 3 years of straight-line depreciation,the asset's total estimated useful life was revised from 8 years to 5 years and there was no change in the estimated residual value.The depreciation expense in year 4 is

Accepted Answer

A) $6,875. 
B) $4,400. 
C) $4,125 
D) $1,650.

Question 12

EBITDA is equal to which of the following?

Accepted Answer

A) net income - interest expense - income taxes - depreciation expense - amortization expense. 
B) net income + interest expense + income taxes + depreciation expense + amortization expense. 
C) operating income - interest expense - income taxes. 
D) operating income + depreciation expense + amortization expense.

Question 13

Goodwill

Accepted Answer

A) is not amortized,but is tested annually for impairment. 
B) is amortized using the straight-line method. 
C) is amortized using the units-of-production method. 
D) is not amortized and is not tested for impairment.

Question 14

E.Flynn Company purchased a building for $400,000.The current book value of the building is $200,000 and the fair value is $180,000.The sum of future cash flows from the building is $160,000.According to GAAP,the amount of impairment loss that should be recognized is

Accepted Answer

A) $0. 
B) $20,000. 
C) $40,000. 
D) $120,000.

Question 15

A company sells a long-lived asset that originally cost $200,000 for $50,000 on December 31,2014.The accumulated depreciation account had a balance of $110,000 after the current year's depreciation of $45,000 had been recorded.The company should recognize a:

Accepted Answer

A) $100,000 loss on sale. 
B) $40,000 gain on sale. 
C) $40,000 loss on sale. 
D) $25,000 loss on sale.

Question 16

One difference between the double-declining-balance method and the straight-line method is that the double-declining-balance method:

Accepted Answer

A) takes book value below residual value. 
B) does not consider the useful life of the asset in the calculation of depreciation. 
C) cannot be used for tax purposes. 
D) uses book value instead of depreciable cost in the calculation of depreciation.

Question 17

Ordinary repairs and maintenance:

Accepted Answer

A) are part of the asset cost of equipment and facilities. 
B) are recorded as expenses when the dollar amount is material. 
C) are always recorded as liabilities. 
D) improve the asset beyond the current accounting period.

Question 18

On January 1,2014,Horton Inc.sells a machine for $23,000.The machine was originally purchased on January 1,2012 for $40,000.The machine was estimated to have a useful life of 5 years and a salvage value of $0.Horton uses straight-line depreciation.In recording this transaction:

Accepted Answer

A) a loss of $1,000 would be recorded. 
B) a gain of $1,000 would be recorded. 
C) a loss of $17,000 would be recorded. 
D) a gain of $23,000 would be recordeD.

Question 19

A machine is purchased on January 1,2014,for $90,000.It is expected to have a useful life of five years and a residual value of $5,000.The company closes its books on December 31.Under the double-declining balance method,what is the total amount of depreciation to be expensed during the 2015 fiscal year (year 2 of 5)?

Accepted Answer

A) $21,600 
B) $22,000 
C) $22,400 
D) $34,000

Question 20

On September 1,a company purchased a vehicle for $23,000 with a residual value of $3,000.The estimated useful life is 5 years and the company uses the straight-line method.What is the depreciation expense for the year ended December 31?

Accepted Answer

A) $1,333. 
B) $1,000 
C) $4,000. 
D) $1,533.

Exam 9: Long-Lived Tangible and Intangible Assets