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?
