Question 1

Using the units-of-production method of depreciation for equipment will generally result in more depreciation expense being recorded over the life of the asset than if the straight-line method had been used.

Accepted Answer

A) True 
 B)False

Question 2

An intangible asset must be identifiable.

Accepted Answer

A) True 
 B)False

Question 3

Asset retirement costs are added to the cost of a depreciable asset.

Accepted Answer

A) True 
 B)False

Question 4

Equipment was purchased for $25,000.Freight charges amounted to $700 and there was a cost of $3,000 for building a foundation and installing the equipment.It is estimated that the equipment will have a $1,600 residual value at the end of its 5-year useful life.Using the straight-line method, annual depreciation expense will be

Accepted Answer

A) $4,540. 
B) $4,680. 
C) $5,420. 
D) $5,740.

Question 5

Equipment was purchased for $20,000.It is estimated that the equipment will have a $3,000 residual value at the end of its 5-year useful life.Using the straight-line method, annual depreciation expense will be

Accepted Answer

A) $3,400. 
B) $4,000. 
C) $4,600. 
D) $5,000.

Question 6

When estimating the useful life of an asset, accountants do not consider

Accepted Answer

A) the cost to replace the asset at the end of its useful life. 
B) vulnerability to obsolescence. 
C) expected repairs and maintenance. 
D) the intended use of the asset.

Question 7

Which of the following statements is not true?

Accepted Answer

A) CCA will be the same whether a company uses the straight-line, diminishing-balance, or units-of-production method. 
B) Cash flow will be affected by the use of different depreciation methods. 
C) Over the life of the asset, total depreciation expense will be the same whether a company uses the straight-line, diminishing-balance, or units-of-production method. 
D) The diminishing-balance depreciation method will result in lower profit compared to the straight-line depreciation method in the early years.

Question 8

Profit margin can be determined by multiplying the asset turnover by the return on assets.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is an intangible asset with a finite life?

Accepted Answer

A) copyright 
B) trademark 
C) goodwill 
D) trade name

Exam 9: Reporting and Analyzing Long-Lived Assets

Using the units-of-production method of depreciation for equipment will generally result in more depreciation expense being recorded over the life of the asset than if the straight-line method had been used.

An intangible asset must be identifiable.

Asset retirement costs are added to the cost of a depreciable asset.

Equipment was purchased for $20,000.It is estimated that the equipment will have a $3,000 residual value at the end of its 5-year useful life.Using the straight-line method, annual depreciation expense will be

When estimating the useful life of an asset, accountants do not consider

Which of the following statements is not true?

Profit margin can be determined by multiplying the asset turnover by the return on assets.

Which of the following is an intangible asset with a finite life?