Intermediate Accounting II

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

True

The sum-of-the-years digits method does not deduct the salvage value in computing the depreciation base. True False

False

For the composite method, the composite A)life is the total depreciable cost divided by the total annual depreciation. B)rate is the total annual depreciation divided by the total depreciable cost. C)rate is the total cost divided by the total annual depreciation. D)life is the total cost divided by the total annual depreciation.

A

Unless otherwise stipulated, 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 in the period of disposal. C)the nearest fraction of a year. D)a full year's depreciation in the period of acquisition, none in the period of disposal.

A

An impairment of property, plant, or equipment has occurred if A)the estimated salvage value is less than the actual proceeds received on disposal. B)the sum of the expected future net cash flows is less than the asset's carrying value. C)the revised estimated useful life is less than the original estimated useful life. D)the expected future cash outflows exceeds the asset's carrying value.

B

Chattanooga Company purchased a depreciable asset for $80,000 on January 1, 2015. The estimated salvage value is $20,000, and the estimated useful life is 5 years. The straight-line method is used for depreciation. On January 1, 2017, the company made a capital expenditure of $16,000 for an addition to the asset. What is depreciation expense for 2017? (Assume that salvage value remains unchanged) A)$25,333 B)$24,000 C)$17,333 D)$14,400 D)$14,400

C

In computing partial-year depreciation, depreciation is normally computed on the basis of: A)a full year's depreciation in the period of acquisition and none in the year 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 disposal

C

Lundy Company purchased a depreciable asset for $99,000 on January 1. The estimated salvage value is $18,000, and the estimated useful life is 9 years. The double-declining balance method will be used for depreciation. What is the depreciation expense for the second year on this asset? Please round the double-declining balance rate to 2 decimal places, e.g. 0.35 or 35% in your intermediate calculations. A)$17,820 B)$13,900 C)$16,988 D)$11,000

C

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

C

Dixon Company purchased a depreciable asset for $32,000. The estimated salvage value is $4,000, and the estimated useful life is 4 years. The double-declining balance method will be used for depreciation. What is the depreciation expense for the second year on this asset? A)$16,000 B)$7,000 C)$6,400 D)$8,000

D

The major difference between the service life of an asset and its physical life is that A)physical life is the life of an asset without consideration of salvage value and service life requires the use of salvage value. B)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. C)physical life is always longer than service life. D)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.

D