FR 2 exam 1 Gleim

ottawa Corp. Uses the sum of years digits method of depreciation in the third year of use of an asset with a 4 year estimated usefull life the portion of the depreciation cost for the asset that the entity will expense is

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 A) straight;line B) Activity methods based on units of production C) Sum-OF-years'-Digits D) Declining-balance

Activity methods based on units of production

In which of the following situations is the activity method of depreciation most appropriate A)an asset's service potential declines with use B)an asset's service potential declines with the passage of time C)An asset's is subject to rapid obsolescence D) an asset incurs uncreasing repairs and maintenance with use

An asset's service potential declines with use

When appreciation has been recorded on property, Plant, and equipment, GAAP state that depreciation

Appreciated amounts

Which of the following reasons provides the best theoretical support for accelerated depreciation A) assets are more efficient in early years and initially generate more revenue B) Expenses should be allocated in amanner that "smooths" earnings C) Repairs and maintenance costs will probably increase in later periods, so depreciation should decline D) Accelerated depreciation provides easier replacement becouse of the time value of money.

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

a machine with a 5-year estimated useful life ans an estimated 10% salvage value was aquired on january 1, year1. On December 31, year 4, accumulated depreciation using the sum-of-the-year's-digits methods is A) (Original cost - salvage value) x (1/15) B) (original cost- salvage value) x (14/15) C) original cost x (14/15) D) original cost x (1/15)

B) (original cost- salvage value) x (14/15)

Depreciation is computed on the original cot minus estimated salvage value under which of the following depreciation methods Double- declining Balance and Activity A) NO NO B) NO YES C) YES YES D) YES NO

B) Double-declining Balance NO Activity YES

Tunis company purchased a can for $45,000 the estimated usefull life of the can 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 which of the following methods will result in the highest depreciation for the first year A) Straight line B) Activity C) Sum-of-the-year's- digits D) Double-declining-balance

Double-declining-balance

Quito Co. acquired a fixed asset with an estimated useful life of 5 years and no salvage value for $15000 at the deginning of year 1 for financial statement 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 year 1 and year to respectively

Lower and lower

Which of the following statements is the assumption on which straight-line depreciation is based A) The operating efficiencyof the asset decreases in later years B) Service value declines as a function of time rather than use C) Service value declines as a function of obsolescence rather than time D)physical wear and tear are more important than economic obsolescence

Service value declines as a function of time rather than use

A depreciable asset has an extimated 15% salvage value. at the end of its estimated use full life, the accumulated depreciation will equal he original cost of the asset under which of the following depreciation mehtods

Straight- line NO Activity NO

On january1, year1, nairobi, 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 december 31, year 5, for 50% of its original cost. if the equipment's disposition resulted in a reported loss, which of the following depreciation methods did nairodi use

Straight-line

Depreciation of a plant asset is the process of

allocation of the asset's cost to the periods of use

Net income is understated if, in first year, estimated salvage value is excluded from the depreciation conputation when using

straight- line method yes and activity Yes