Int Act Ch 11 pt.1

A machine with a 5-year estimated useful life and an estimated 10% salvage value was acquired on Jan 1 yr 1. On Dec 31, yr 4, accumulated depreciation using the sum-of-the-years'-digits method would be

(Original cost less salvage value) multiplied by 14/15

Ottawa Corp. uses the sum-of-the-years'-digits method of depreciation. In the third year of use of an asset with a 4-year estimated useful life, the portion of the depreciation cost for the asset that the entity will expense is A. 10% B. 20% C. 30% D. 33.33%

20%

Under which of the following depreciation methods is it possible for depreciation expense to be higher in the later years of an asset's useful life?

Activity method based on units of production

Depreciation of a plant asset is the process of

Allocation of the asset's cost to periods use

In which of the following situations is the units-of-production method of depreciation most appropriate?

An asset's service potential declines with use

Which of the following reasons provides the best theoretical support for accelerated depreciation?

Assets are more efficient in early years & initially generate more revenue

Net income is understated if, in the first year, estimated salvage value is excluded from the depreciation computation when using the Straight-line Production or Method Use Method a. Yes No b. Yes Yes c. No No d. No Yes

Both straight line and Activity method

Tunis company purchased a van for $45k. The estimated useful life of the van is 5 yrs or 80k miles, and the salvage is $5k. Actual mileage driven in the first year was 20k miles. Which of the following methods will result in the highest depreciation for the first year?

Double declining balance

A depreciable asset has an estimated 15% salvage value. At the end of its estimated useful life, the accumulated depreciation would equal the original cost of the asset under which of the following depreciation methods?

Neither straight line nor productive output

Depreciation is computed on the original cost less estimated salvage value under which of the following depreciation methods?

Productive Output

On Jan 1, yr 5, Crater purchased equipment having an estimated salvage value equal to 20% of its original cost at the end of a 10 yr life. The equipment was sold Dec 31, yr 9, for 50% of its original cost. If the equipment's disposition resulted in a reported loss, which of the following depreciation methods did Crater use?

Straight line

Which of the following statements is the assumption on which straight-line depreciation is based?

service value declines as a function of time rather than use

Quito Co. acquired a fixed asset with an estimated useful life of 5 yrs and no salvage value for $15k at the beg of yr 1. For financial statements purposes, how would the depreciation expense calculated using the double-declining-balance method compare with that calculated using the sum-of-the-years'-digits method in yr 1 and yr 2?

year 1 is higher and year 2 is lower