AC305 Chapter 11 MC

C. the nearest full month.

Unless otherwise stipulated, depreciation is normally computed on the basis of: A. a full year's depreciation in the period of acquisition, none in the period of disposal. B. the nearest fraction of a year. C. the nearest full month. D. a half-year's depreciation in the period of acquisition and in the period of disposal.

A. the nearest full month.

n computing partial-year depreciation, depreciation is normally computed on the basis of: A. the nearest full month. B. a half year's depreciation in the period of acquisition and disposal. C. a full year's depreciation in the period of acquisition and none in the year of disposal. D. the nearest fraction of a year.

C. composite method.

A depreciation method that is used when a collection of assets is heterogeneous and the assets have different useful lives is the: A. hybrid method. B. combination method. C. composite method. D. group method.

D. ignores variations in the rate of asset use.

A principal objection to the straight-line method of depreciation is that it A. tends to result in a constant rate of return on a diminishing investment base. B. gives smaller periodic write-offs than decreasing charge methods. C. provides for the declining productivity of an aging asset. D. ignores variations in the rate of asset use.

False

Depreciation is a means of adjusting an asset's cost to its fair value. True False

D. means of allocating the cost of a tangible asset to each of the periods that benefit from its use.

Depreciation is a: A. means of recording the decline in an asset's fair market value. B. measure of deterioration in the physical condition of an asset. C. matter of valuation. D. means of allocating the cost of a tangible asset to each of the periods that benefit from its use.

True

Impairment has occurred when the undiscounted expected future net cash flows are less than the carrying amount of an asset. True False

A. service life refers to the time an asset will be used by a company and physical life refers to how long the asset will last.

The major difference between the service life of an asset and its physical life is that A. service life refers to the time an asset will be used by a company and physical life refers to how long the asset will last. B. physical life is the life of an asset without consideration of salvage value and service life requires the use of salvage value. C. physical life is always longer than service life. D. service life refers to the length of time an asset is of use to its original owner, while physical life refers to how long the asset will be used by all owners.

True

Total depreciation over an asset's life cannot exceed an amount equal to cost minus estimated salvage value. True False

A. Declining-balance.

Which of the following depreciation methods uses book value to determine annual depreciation? A. Declining-balance. B. Sum-of-the-years' digits. C. Straight-line. D. Units of production.

A. Depreciation lowers the book value of the asset as it ages and its fair value declines.

Which of the following is NOT true of depreciation accounting? A. Depreciation lowers the book value of the asset as it ages and its fair value declines. B. Tangible assets with limited lives are depreciated. C. Depreciation matches expenses against revenues over the periods which benefit from the asset's use. D. Depreciation is a process of cost allocation.

B. Systematic and rational allocation

Which of the following principles best describes the conceptual rationale for the methods of matching depreciation expense with revenues? A. Associating cause and effect B. Systematic and rational allocation C. Immediate recognition D. Partial recognition

C. Activity method.

Which one of the following is not an accelerated depreciation method? A. Declining-balance method. B. Sum-of-the years' digits method. C. Activity method. D. Double-declining-balance method

C. On assets being held for disposal.

hen is the restoration of an impairment loss permitted? A. On assets that have been that have already been disposed. B. On assets held for use. C. On assets being held for disposal. D. On all tangible assets whether held for use of disposal.