Question 1

Minerals removed from the earth are classified as intangible assets.

Accepted Answer

Minerals removed from the earth are classified as tangible assets because they have physical substance.

Question 2

The units-of-output depreciation method provides a good match of expenses against revenue.

Accepted Answer

The units-of-output depreciation method matches expenses to the estimated output of an asset. This results in a better alignment of expenses with the revenue produced by the asset, making it a good method for matching expenses against revenue.

Question 3

The amount of depreciation expense for a fixed asset costing $95,000,with an estimated residual value of $5,000 and a useful life of 5 years or 20,000 operating hours,is $21,375 by the units-of-output method during a period when the asset was used for 4,500 hours.

Accepted Answer

The depreciation expense using the units-of-output method is calculated as: [(Cost - Residual Value) / Total Estimated Units of Production] * Units Produced in Period. Therefore, ($95,000 - $5,000) / 20,000 hours * 4,500 hours = $18,000.

Question 4

The depreciable cost of a building is the same as its acquisition cost.

Accepted Answer

The depreciable cost of a building is the acquisition cost minus any salvage value, so it is typically lower than the acquisition cost.

Question 5

For income tax purposes,most companies use an accelerated deprecation method called double declining balance.

Accepted Answer

The answer of For income tax purposes,most companies use an...

Question 6

It is necessary for a company to use the same depreciation method for all of its depreciable assets.

Accepted Answer

A company can use different depreciation methods for different depreciable assets based on the asset's useful life, salvage value, and other factors. However, the company must disclose the depreciation method used for each asset in its financial statements.

Question 7

An estimate of the amount for which an asset can be sold at the end of its useful life is called residual value.

Accepted Answer

Residual value is the estimated amount for which an asset can be sold at the end of its useful life.

Question 8

Residual value is not incorporated in the initial calculations for double-declining-balance depreciation.

Accepted Answer

Double-declining-balance depreciation method only considers the initial cost of the asset and its useful life, and does not take into account residual value. Residual value is only considered at the end when calculating the final year's depreciation.

Question 9

The double-declining-balance depreciation method calculates depreciation each year by taking twice the straight-line rate times the book value of the asset at the beginning of each year.

Accepted Answer

This statement accurately describes the double-declining-balance depreciation method.

Question 10

It is not necessary for a company to use the same depreciation method for financial statements and for determining income taxes.

Accepted Answer

The IRS allows companies to use different depreciation methods for income tax purposes as long as they follow certain guidelines. Therefore, it is not necessary for a company to use the same method for financial statements and tax purposes.

Question 11

The amount of the depreciation expense for the second full year of use of a fixed asset costing $100,000,with an estimated residual value of $5,000 and a useful life of 4 years,is $25,000 by the double-declining-balance method.

Accepted Answer

The double-declining-balance method calculates depreciation based on a fixed percentage applied to the undepreciated balance of the asset each year. The percentage is twice the straight-line rate, which is calculated by dividing the depreciable cost (cost - residual value) by the useful life. In this case, the depreciable cost is $95,000 ($100,000 - $5,000), and the straight-line rate is 25% ($95,000 / 4 years). The double-declining-balance rate is twice that, or 50%. Applying that to the beginning balance of $100,000 yields depreciation of $50,000 in the first year. The second year's depreciation is calculated by applying the rate to the remaining balance of $50,000, which results in $25,000. Therefore, the statement is True.

Question 12

The method used to calculate the depletion of a natural resource is the straight-line method.

Accepted Answer

The straight-line method is a method of calculating depreciation, not the depletion of natural resources. Depletion is calculated using either the units-of-production or the percentage-of-sales method.

Question 13

Once the useful life of a depreciable asset has been estimated and the amount to be depreciated each year has been determined,the amounts cannot be changed.

Accepted Answer

The estimated useful life and the amount to be depreciated each year can be reviewed and changed if necessary, such as if the asset's usage or condition changes. This process is called a depreciation review or revaluation.

Question 14

Regardless of the depreciation method,the amount that will be depreciated during the life of the asset will be the same.

Accepted Answer

The total depreciation expense over the life of an asset will be the same regardless of the depreciation method used; what varies is the timing and pattern of the expense recognition.

Question 15

The amount of depreciation expense for the first full year of use of a fixed asset costing $95,000,with an estimated residual value of $5,000 and a useful life of 5 years,is $19,000 by the straight-line method.

Accepted Answer

The answer of The amount of depreciation expense for the...

Question 16

When depreciation estimates are revised,all years of the asset's life are affected.

Accepted Answer

When depreciation estimates are revised, it affects the depreciation expense calculation from the point of revision forward, not the years that have already passed.

Question 17

Capital expenditures are costs that are charged to stockholders' equity accounts.

Accepted Answer

Capital expenditures are costs that are typically initially charged to an asset account and then gradually expensed through depreciation over the asset's useful life. They do not affect stockholders' equity accounts directly.

Question 18

The double-declining-balance method is an accelerated depreciation method.

Accepted Answer

The double-declining-balance method is an accelerated depreciation method that allows for a larger depreciation expense in the early years of an asset's life and decreasing expenses in later years. This method involves multiplying a fixed rate of depreciation (twice the straight-line rate) by the asset's book value at the beginning of each period.

Question 19

Intangible assets differ from property,plant,and equipment assets in that they lack physical substance.

Accepted Answer

Intangible assets are assets that do not have physical substance, such as patents, copyrights, trademarks, and goodwill. Property, plant, and equipment assets, on the other hand, are physical assets like land, buildings, and machinery.

Question 20

Revising depreciation estimates affects the amounts of depreciation expense recorded in past periods.

Accepted Answer

Revising depreciation estimates affects the depreciation expense in the current and future periods, not past periods. Past financial statements are not retroactively adjusted for changes in depreciation estimates.

Quiz 9: Long-Term Assets: Fixed and Intangible