Question 1

Amortization retains funds by reducing income and thereby impacting the dividend payment decision.

Accepted Answer

A) True 
 B)False

Question 2

On January 1, 2001, VS purchased a machine that cost $50,000; the estimated residual value was $4,640. At December 31, 2001, the following data are available (end of the accounting period): $\begin{array}{|l|l|}
\hline \text { Estimated Life } & \text { Utilization During 2001 } \
\hline 6 \text { years } & 1 \text { year } \
\hline 216,000 \text { service hours } & 20,000 \text { service hours } \
\hline 100,000 \text { units of product } & 15,000 \text { units } \
\hline
\end{array}$Give the 2001 amortization expense for each of the following methods: $\begin{array}{|l|l|l|}
\hline \text { Case } & \text { Method } & \text { Amortization First Year } \
\hline \text { A } & \text { Straight-line } & \$ \
\hline \text { B } & \text { Sum-of-the-years'-digits } & \$ \
\hline \text { C } & \text { Service hours } & \$ \
\hline \text { D } & \text { Productive output } & \$ \
\hline \text { E } & \text { Declining balance } & \$ \
\hline
\end{array}$

Accepted Answer

CASE A: Straight-line - $45,360/6 = $7,5

Question 3

The sum-of-the-years'-digits amortization method does not take into account the asset's estimated residual value.

Accepted Answer

A) True 
 B)False

Question 4

Choose the best description of depreciable cost.

Accepted Answer

A)  Minimum book value 
B)  Book value 
C)  Salvage value 
D)  Original cost less salvage value 
A)  Minimum book value 
B)  Book value 
C)  Salvage value 
D)  Original cost less salvage value

Question 5

Which of the following methods permits total amortization on a plant asset to exceed depreciable cost?

Accepted Answer

A)  Straight-line 
B)  Declining balance 
C)  There is no such method 
D)  Sum-of-the-years'-digits 
E)  All acceptable methods if salvage value is not zero 
A)  Straight-line 
B)  Declining balance 
C)  There is no such method 
D)  Sum-of-the-years'-digits 
E)  All acceptable methods if salvage value is not zero

Question 6

The net book value or carrying value of an asset is its original cost less any capitalized post-acquisition cost less accumulated amortization to date.

Accepted Answer

A) True 
 B)False

Question 7

Amortization is also called depreciation when it is associated with tangible capital assets and depletion when associated with natural resources.

Accepted Answer

A) True 
 B)False

Question 8

On January 1, 2014, the Rose Company purchased a machine costing $100,000. The machine is a Class 8 asset for tax purposes with a CCA rate of 20%. It has an estimated $20,000 residual value at the end of its economic life. Assuming the company uses the capital cost allowance method; calculate the amount of CCA deduction for tax purposes for the year 2014. Rose Company has a calendar year-end and adjusting entries are only made at year-end.

Accepted Answer

Original cost × rate

Question 9

In the early years of an asset's useful life, the use of double-declining balance method of amortization will result in a more favourable debt-to-equity ratio than the straight-line method would.

Accepted Answer

A) True 
 B)False

Question 10

If a company disposes of the last asset in a class and still has a balance in its UCC pool, in:

Accepted Answer

A)  a terminal loss. 
B)  an impairment loss allocated to other asset classes. 
C)  recaptured CCA. 
D)  a credit to the revaluation surplus account. 
A)  a terminal loss. 
B)  an impairment loss allocated to other asset classes. 
C)  recaptured CCA. 
D)  a credit to the revaluation surplus account.

Question 11

Under both the retirement and replacement systems of amortization, no gain or loss is recognized on disposal, but an accumulated amortization account continues to be used.

Accepted Answer

A) True 
 B)False

Question 12

On January 1, 2013, Buildings-4-U Ltd. purchased 5 heavy duty dump trucks for cash. Each truck cost $35,000 and the estimated useful life was 5 years with a residual value of $5,000. On the same day Buildings-4-U also purchased 5 small dump trucks for cash. Each small truck cost $15,000 and had an estimated useful life of 5 years and a residual value of $3,000. Buildings-4-U will use group amortization for the 20 trucks on a straight-line basis. Building-4-U has a December 31 year-end and only accounts for amortization at year-end.
On March 1, 2014, one of the large trucks was involved in an accident, which resulted in a total loss; however, insurance claim proceeds of $21,000 were received from the insurance company.
On June 1, 2014, the company purchased one additional heavy duty truck (same type) at a cost of $36,000 (useful life and residual value unchanged).
Give all entries required on each of the following dates relating to the above transactions:
January 1, 2013:
December 31, 2013:
March 1, 2014:
June 1, 2014:
December 31, 2014:

Accepted Answer

@#IMG-DLM&
December 31, 2014:
Amortizati

Question 13

A general description of the amortization methods applicable to major classes of depreciable assets is not essential to a fair presentation of financial position.

Accepted Answer

A) True 
 B)False

Question 14

Amortization expense is the difference between the current realizable value (in current condition) and the original cost of the asset with the:

Accepted Answer

A)  declining-balance method. 
B)  inventory system. 
C)  retirement system. 
D)  replacement system. 
A)  declining-balance method. 
B)  inventory system. 
C)  retirement system. 
D)  replacement system.

Amortization retains funds by reducing income and thereby impacting the dividend payment decision.

The sum-of-the-years'-digits amortization method does not take into account the asset's estimated residual value.

Choose the best description of depreciable cost.

Which of the following methods permits total amortization on a plant asset to exceed depreciable cost?

The net book value or carrying value of an asset is its original cost less any capitalized post-acquisition cost less accumulated amortization to date.

Amortization is also called depreciation when it is associated with tangible capital assets and depletion when associated with natural resources.

In the early years of an asset's useful life, the use of double-declining balance method of amortization will result in a more favourable debt-to-equity ratio than the straight-line method would.

If a company disposes of the last asset in a class and still has a balance in its UCC pool, in:

Under both the retirement and replacement systems of amortization, no gain or loss is recognized on disposal, but an accumulated amortization account continues to be used.

A general description of the amortization methods applicable to major classes of depreciable assets is not essential to a fair presentation of financial position.

Amortization expense is the difference between the current realizable value (in current condition) and the original cost of the asset with the:

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Financial Instruments: Investments in Bonds and Equity Securities

Filters

Exam 10: Depreciation, Amortization, and Impairment

Amortization retains funds by reducing income and thereby impacting the dividend payment decision.

The sum-of-the-years'-digits amortization method does not take into account the asset's estimated residual value.

Choose the best description of depreciable cost.

Which of the following methods permits total amortization on a plant asset to exceed depreciable cost?

The net book value or carrying value of an asset is its original cost less any capitalized post-acquisition cost less accumulated amortization to date.

Amortization is also called depreciation when it is associated with tangible capital assets and depletion when associated with natural resources.

In the early years of an asset's useful life, the use of double-declining balance method of amortization will result in a more favourable debt-to-equity ratio than the straight-line method would.

If a company disposes of the last asset in a class and still has a balance in its UCC pool, in:

Under both the retirement and replacement systems of amortization, no gain or loss is recognized on disposal, but an accumulated amortization account continues to be used.

A general description of the amortization methods applicable to major classes of depreciable assets is not essential to a fair presentation of financial position.

Amortization expense is the difference between the current realizable value (in current condition) and the original cost of the asset with the:

The Framework for Financial Reporting

Accounting Judgements

Statements of Income and Comprehensive Income

Statements of Financial Position and Changes in Equity; Disclosure Notes

The Statement of Cash Flows

Revenue Recognition

Financial Assets: Cash and Receivables

Cost-Based Inventories and Cost of Sales

Long-Lived Assets

Financial Instruments: Investments in Bonds and Equity Securities

Filters