Acct 302

When is the use of the units-of-production method of depreciation most appropriate?

An asset's service potential declines with the passage of time.

Under which 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

A long-lived asset (disposal group) classified as held for sale should be accounted for by:

Adjusting only a long-lived assets for write-downs to fair value minus cost to sell or the reversal of such an adjustment.

Depreciation of a plant asset is the process of:

Allocation of the asset's cost to the periods of use.

What is the reasons the provides the best theoretical support for accelerated depreciation?

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

Tunis Company purchased a van for $45,000. The estimated useful life of the van is 5 years or 80,000 miles, and the salvage value is $5,000. Actual mileage driven in the first year was 20,000 miles. What method will result in the highest depreciation for the first year?

Double-declining balance

Which of the following is not an accurate statement of a criterion that must be met before interest is required to be capitalized? A- Expenditures relative to a qualifying asset have been made B- Activities necessary to prepare the asset for its intended use are in progress. C- Interest costs incurred on borrowings. D- Debt is Incurred for the project.

D- Debt is incurred for the project

Land was purchased to be used as the site for the construction of a plant. A building on the property sold and removed by the buyer so that construction on the plant could begin. The proceeds from the sale of the building should be

Deducted from the cost of the land

A company purchased a building for $45,000 cash and recorded the cost on the books at the amount. However, the fair value of the building was $46,500 on the date of purchase. How should the company account for this $1,500 difference?

Do not record the amount

A contributed plant asset for which the fair value has been determined, and for which incidental costs were incurred in acceptance of the asset, should be recorded at an amount equal to its

Fair Value and incidental costs incurred

Property, plant, and equipment are conventionally presented in the balance sheet at

Historical Cost less Depreciated portion thereof

An impairment loss on a long-lived asset (asset group) to be held and used is reported by a business enterprise in:

Income from continuing operations

If a long-lived asset satisfies the criteria for classification as held for sale

It is not depreciated

Describes the proper accounting for non-monetary exchanges that are deemed to have commercial substance?

It recognizes gains and losses immediately

What is the assumption on straight-line depreciation is based?

Service value declines as a function of time rather than use.

On Jan. 1, Year 5, Crater Inc. purchased equipment having an estimated salvage value equal to 20% of its original cost at the end of a 10-year life. The equipment was sold on Dec. 31, Year 9, for 50% of its original cost. If the equipment's disposition resulted in a reported loss, what depreciation method was used?

Straigt-line

What should a long-lived asset be tested for recoverability?

When events or changes in circumstances indicate that its carrying amount may not be recoverable.

Interest should be capitalized for assets that are

being constructed or otherwise being produced as discrete projects for an entity's own use