accounting 251

straight-line method.

The depreciation method that allocates an equal amount of the depreciable base to each year of the asset's service life is the

straight-line

The depreciation method that is easiest to apply and results in higher net income in earlier years is

(cost - residual value)/service life.

The formula for straight-line depreciation is

amount received less the book value of asset sold

The gain or loss on disposal of an asset is calculated as:

Exchange of fixed assets

Which of the following involves both an acquisition and a disposition of an asset?

Franchise rights

Which of the following is not an example of a tangible asset?

$1,500

At the beginning of year 1, Valerie Corp. purchases equipment for $10,000. The equipment has a residual value of $4,000 and an expected service life of 4 years. What is straight-line depreciation for year 1?

contra asset.

The accumulated depreciation account is classified as a(n)

depreciation

The allocation of the cost of a tangible asset over its service life is referred to as

residual value.

The term used to describe the amount the company expects to receive for an asset at the end of its service life is

Residual

value is the amount the company expects to receive for the asset at the end of its service life.

an allocation of a cost of an asset.

For accounting purposes, depreciation is

book value.

The original cost of an asset minus accumulated depreciation is

Book Value

The original cost of the asset less the accumulated depreciation is the

the estimated use that the company expects to obtain from the asset before disposing of it.

The service life or useful life of an asset is

a loss must be recognized for the remaining book value. no cash is received.

A retirement or abandonment of an asset is different from a sale of an asset because

Clem will depreciate the machine for $150,000 over its service life.

On January 1, year 1, Clem Corp. purchased equipment for $160,000. The equipment has a residual value of $10,000, and has a life of 100,000 hours. Clem uses the activity-based method of depreciation. In year 1, Clem used the machine 2,000 hours, and in year 2, Clem used the machine 3,000 hours. Which of the following statements is true?

depreciation amortization

The allocation of the cost of a tangible fixed asset is referred to as ____________, whereas the allocation of the cost of an intangible asset is referred to as __________.

the cost of the asset minus the residual value.

The depreciable cost is

Allocation of the cost of a tangible fixed asset Allocation of the cost of natural resources Allocation of the cost of an intangible asset

Match each term with its definition.

$70,000 Rationale: $100,000/10 years = $10,000 depreciation per year. Historical cost of $100,000 less $30,000 depreciation (for 2018, 2019, and 2020) = $70,000.

On January 1, 2018, Lennox Corporation purchased equipment for $100,000. Lennox depreciated the equipment straight--line over 10 years with no residual value. What is the book value of the equipment on January 1, 2021?

$26,000

On January 1, 2018, Pritchett Corporation purchased equipment for $50,000. The equipment had a five-year life with a $10,000 residual value. Pritchett uses the straight-line depreciation method. What is the book value of the equipment on January 1, 2021?

revenue

Recording depreciation results in the allocation of the cost of a long-term asset to the years during which the asset provides

provides benefits to the company.

When we recognize depreciation, we allocate a portion of the asset's cost to each year in which the asset

As a contra account to equipment on the balance sheet

Where is the account accumulated depreciation on equipment found on the financial statements?

Straight-line Declining-balance Activity-based

Which of the following are commonly used depreciation methods?

It allocates an equal amount of depreciation to each year the asset is used.

Which statement is true about the straight-line method of depreciation?