Question 1

For income statement purposes, depreciation is a variable expense if the depreciation method used is

Accepted Answer

A) units-of-production. 
B) straight-line. 
C) sum-of-the-years'-digits. 
D) declining-balance. 
A) units-of-production. 
B) straight-line. 
C) sum-of-the-years'-digits. 
D) declining-balance.

Question 2

The term "depreciable cost," or "depreciable base," as it is used in accounting, refers to

Accepted Answer

A) the total amount to be charged (debited) to expense over an asset's useful life. 
B) the cost of the asset less the related depreciation recorded to date. 
C) the estimated market value of the asset at the end of its useful life. 
D) the acquisition cost of the asset. 
A) the total amount to be charged (debited) to expense over an asset's useful life. 
B) the cost of the asset less the related depreciation recorded to date. 
C) the estimated market value of the asset at the end of its useful life. 
D) the acquisition cost of the asset.

Question 3

Depreciation is a means of cost allocation, not a matter of valuation.

Accepted Answer

A) True 
 B)False

Question 4

The three factors involved in the depreciation process are the depreciation base, the useful life, and the risk of obsolescence.

Accepted Answer

A) True 
 B)False

Question 5

George Martin Corporation purchased a depreciable asset for $300,000 on January 1, 2005.The estimated salvage value is $30,000, and the estimated useful life is 9 years.The straight-line method is used for depreciation.In 2008, George Martin changed its estimates to a total useful life of 5 years with a salvage value of $50,000.What is 2008 depreciation expense?

Accepted Answer

A) $30,000 
B) $50,000 
C) $80,000 
D) $90,000 
A) $30,000 
B) $50,000 
C) $80,000 
D) $90,000

Question 6

The book value of a plant asset is

Accepted Answer

A) the fair market value of the asset at a balance sheet date. 
B) the asset's acquisition cost less the total related depreciation recorded to date. 
C) equal to the balance of the related accumulated depreciation account. 
D) the assessed value of the asset for property tax purposes. 
A) the fair market value of the asset at a balance sheet date. 
B) the asset's acquisition cost less the total related depreciation recorded to date. 
C) equal to the balance of the related accumulated depreciation account. 
D) the assessed value of the asset for property tax purposes.

Question 7

Depreciation is based on the decline in the fair market value of the asset.

Accepted Answer

A) True 
 B)False

Question 8

An impairment loss is the amount by which the carrying amount of the asset exceeds the sum of the expected future net cash flows from the use of that asset.

Accepted Answer

A) True 
 B)False

Question 9

Reserve recognition accounting

Accepted Answer

A) is presently the generally accepted accounting method for financial reporting of oil and gas reserves. 
B) is a historical cost method similar to the full cost approach and the successful efforts approach. 
C) is used for reporting of oil and gas reserves for federal income tax purposes. 
D) requires estimates of future production costs, the appropriate discount rate, and the expected selling price of oil and gas reserves. 
A) is presently the generally accepted accounting method for financial reporting of oil and gas reserves. 
B) is a historical cost method similar to the full cost approach and the successful efforts approach. 
C) is used for reporting of oil and gas reserves for federal income tax purposes. 
D) requires estimates of future production costs, the appropriate discount rate, and the expected selling price of oil and gas reserves.

Question 10

Use of the double-declining balance method

Accepted Answer

A) results in a decreasing charge to depreciation expense. 
B) means salvage value is not deducted in computing the depreciation base. 
C) means the book value should not be reduced below salvage value. 
D) all of these. 
A) results in a decreasing charge to depreciation expense. 
B) means salvage value is not deducted in computing the depreciation base. 
C) means the book value should not be reduced below salvage value. 
D) all of these.

Question 11

Normally, companies compute depletion on a straight-line basis.

Accepted Answer

A) True 
 B)False

Question 12

Covington Company reported the following data: $\begin{array}{lrr}&2007&2008\
\text { Sales } & \$ 2,000,000 & \$ 2,600,000 \
\text { Net Income } & 300,000 & 400,000 \
\text { Assets at year end } & 1,800,000 & 2,500,000 \
\text { Liabilities at year end } & 1,100,000 & 1,500,000
\end{array}$ What is Rubber Soul's asset turnover for 2008?

Accepted Answer

A) 1.12 
B) 1.15 
C) 1.30 
D) 1.56 
A) 1.12 
B) 1.15 
C) 1.30 
D) 1.56

Question 13

Garrison Corporation purchased a depreciable asset for $420,000 on January 1, 2005.The estimated salvage value is $42,000, and the estimated total useful life is 9 years.The straight-line method is used for depreciation.In 2008, Garrison changed its estimates to a useful life of 5 years with a salvage value of $70,000.What is 2008 depreciation expense?

Accepted Answer

A) $42,000 
B) $70,000 
C) $112,000 
D) $126,000 
A) $42,000 
B) $70,000 
C) $112,000 
D) $126,000

Question 14

Norris Corporation purchased factory equipment that was installed and put into service January 2, 2006, at a total cost of $60,000.Salvage value was estimated at $4,000.The equipment is being depreciated over four years using the double-declining balance method.For the year 2007, Norris should record depreciation expense on this equipment of

Accepted Answer

A) $14,000. 
B) $15,000. 
C) $28,000. 
D) $30,000. 
A) $14,000. 
B) $15,000. 
C) $28,000. 
D) $30,000.

Question 15

Windsor Company purchased a depreciable asset for $300,000 on April 1, 2005.The estimated salvage value is $30,000, and the estimated total useful life is 5 years.The straight-line method is used for depreciation.What is the balance in accumulated depreciation on May 1, 2008 when the asset is sold?

Accepted Answer

A) $118,000 
B) $126,000 
C) $148,500 
D) $166,500 
A) $118,000 
B) $126,000 
C) $148,500 
D) $166,500

Question 16

Prentice Company purchased a depreciable asset for $200,000.The estimated salvage value is $20,000, and the estimated useful life is 10 years.The straight-line method will be used for depreciation.What is the depreciation base of this asset?

Accepted Answer

A) $18,000 
B) $20,000 
C) $180,000 
D) $200,000 
A) $18,000 
B) $20,000 
C) $180,000 
D) $200,000

Question 17

Depreciation, depletion, and amortization all involve the allocation of the cost of a long-lived asset to expense.

Accepted Answer

A) True 
 B)False

Question 18

The first step in determining whether an impairment has occurred is to estimate the future net cash flows expected from the use of that asset and its eventual disposition.

Accepted Answer

A) True 
 B)False

Question 19

Jantz Corporation purchased a machine on July 1, 2004, for $750,000.The machine was estimated to have a useful life of 10 years with an estimated salvage value of $42,000.During 2007, it became apparent that the machine would become uneconomical after December 31, 2011, and that the machine would have no scrap value.Accumulated depreciation on this machine as of December 31, 2006, was $177,000.What should be the charge for depreciation in 2007 under generally accepted accounting principles?

Accepted Answer

A) $106,200 
B) $114,600 
C) $123,000 
D) $143,250 
A) $106,200 
B) $114,600 
C) $123,000 
D) $143,250

Question 20

A plant asset with a five-year estimated useful life and no residual value is sold at the end of the second year of its useful life.How would using the sum-of-the-years'-digits method of depreciation instead of the double-declining balance method of depreciation affect a gain or loss on the sale of the plant asset? $\begin{array}{lll}
&\text { Gain } &\text { loss } \
\text { a. } & \text { Decrease } & \text { Decrease } \
b.&\text {  Decrease } & \text { Increase } \
\text { c. } & \text { Increase } & \text { Decrease } \
\text { d. } & \text { Increase } & \text { Increase }
\end{array}$

Accepted Answer

The answer of A plant asset with a five-year estimated...

For income statement purposes, depreciation is a variable expense if the depreciation method used is

The term "depreciable cost," or "depreciable base," as it is used in accounting, refers to

Depreciation is a means of cost allocation, not a matter of valuation.

The three factors involved in the depreciation process are the depreciation base, the useful life, and the risk of obsolescence.

The book value of a plant asset is

Depreciation is based on the decline in the fair market value of the asset.

An impairment loss is the amount by which the carrying amount of the asset exceeds the sum of the expected future net cash flows from the use of that asset.

Reserve recognition accounting

Use of the double-declining balance method

Normally, companies compute depletion on a straight-line basis.

Covington Company reported the following data: 2007 2008 Sales \ 2,000,000 \ 2,600,000 Net Income 300,000 400,000 Assets at year end 1,800,000 2,500,000 Liabilities at year end 1,100,000 1,500,000 What is Rubber Soul's asset turnover for 2008?

Windsor Company purchased a depreciable asset for $300,000 on April 1, 2005.The estimated salvage value is $30,000, and the estimated total useful life is 5 years.The straight-line method is used for depreciation.What is the balance in accumulated depreciation on May 1, 2008 when the asset is sold?

Prentice Company purchased a depreciable asset for $200,000.The estimated salvage value is $20,000, and the estimated useful life is 10 years.The straight-line method will be used for depreciation.What is the depreciation base of this asset?

Depreciation, depletion, and amortization all involve the allocation of the cost of a long-lived asset to expense.

The first step in determining whether an impairment has occurred is to estimate the future net cash flows expected from the use of that asset and its eventual disposition.

Financial Accounting and Accounting Standards

Conceptual Framework Underlying Financial Accounting

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Intangible Assets

Current Liabilities and Contingencies

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Exam 11: Depreciation, Impairments, and Depletion

For income statement purposes, depreciation is a variable expense if the depreciation method used is

The term "depreciable cost," or "depreciable base," as it is used in accounting, refers to

Depreciation is a means of cost allocation, not a matter of valuation.

The three factors involved in the depreciation process are the depreciation base, the useful life, and the risk of obsolescence.

The book value of a plant asset is

Depreciation is based on the decline in the fair market value of the asset.

An impairment loss is the amount by which the carrying amount of the asset exceeds the sum of the expected future net cash flows from the use of that asset.

Reserve recognition accounting

Use of the double-declining balance method

Normally, companies compute depletion on a straight-line basis.

Covington Company reported the following data: 2007 2008 Sales \ 2,000,000 \ 2,600,000 Net Income 300,000 400,000 Assets at year end 1,800,000 2,500,000 Liabilities at year end 1,100,000 1,500,000 What is Rubber Soul's asset turnover for 2008?

Windsor Company purchased a depreciable asset for $300,000 on April 1, 2005.The estimated salvage value is $30,000, and the estimated total useful life is 5 years.The straight-line method is used for depreciation.What is the balance in accumulated depreciation on May 1, 2008 when the asset is sold?

Prentice Company purchased a depreciable asset for $200,000.The estimated salvage value is $20,000, and the estimated useful life is 10 years.The straight-line method will be used for depreciation.What is the depreciation base of this asset?

Depreciation, depletion, and amortization all involve the allocation of the cost of a long-lived asset to expense.

The first step in determining whether an impairment has occurred is to estimate the future net cash flows expected from the use of that asset and its eventual disposition.

Financial Accounting and Accounting Standards

Conceptual Framework Underlying Financial Accounting

The Accounting Information System

Income Statement and Related Information

Balance Sheet and Statement of Cash Flows

Accounting and the Time Value of Money

Cash and Receivables

Valuation of Inventories: a Cost-Basis Approach

Inventories: Additional Valuation Issues

Acquisition and Disposition of Property, Plant, and Equipment

Intangible Assets

Current Liabilities and Contingencies

Filters