Question 1

Which of the following is NOT a way of calculating the amount of depreciation for each period?

Accepted Answer

The weighted-average method is not a way of calculating the amount of depreciation for each period. The other three methods (straight-line method, declining-balance method, and sum-of-the-years'-digit method) are commonly used methods for calculating depreciation.

Question 2

Use the following data: $$\begin{array} { l r } 
\text { Asset cost } & \$ 120,000 \
\text { Expected life } & 3 \text { years } \
\text { Estimated salvage value } & \$ 15,000
\end{array}$$ ? Using the straight-line method, the amount of depreciation each year would be

Accepted Answer

The straight-line depreciation method calculates annual depreciation by subtracting the salvage value from the asset cost and dividing by the asset's useful life: $(\$120,000 - \$15,000) / 3 = \$35,000$.

Question 3

The write-off of the cost of an intangible asset is called

Accepted Answer

The write-off of the cost of an intangible asset is called amortization. This is because intangible assets, such as patents or trademarks, are not physical in nature and do not depreciate like tangible assets. Instead, their cost is spread out over their useful life through the process of amortization.

Question 4

Properties whose physical substance consists of natural resources that are consumed in the operation of the business are called

Accepted Answer

Wasting assets refer to natural resources that are used up and consumed in the operation of a business, such as oil, gas, minerals, and timber. These assets are not depreciable, as they do not lose value due to wear and tear, but rather through depletion. Amortizable assets refer to intangible assets that have a finite useful life, such as patents or copyrights. Depreciable assets are tangible assets that lose value over time due to wear and tear, such as vehicles or machinery. Intangible assets refer to non-physical assets, such as trademarks or goodwill.

Question 5

The write-off of the cost of plant and equipment is called

Accepted Answer

Depreciation refers to the systematic write-off of the cost of plant and equipment over its useful life. Depletion is the similar concept but used for natural resources such as oil or minerals. Amortization is the write-off of the cost of intangible assets such as patents or copyrights. Deterioration is the decline in the physical condition of an asset.

Question 6

Salvage value is not considered directly in the determination of the deprecation amount with the

Accepted Answer

The declining-balance method does not directly consider salvage value in calculating depreciation; it applies a constant rate to the book value of the asset, which decreases over time.

Question 7

The depreciation method in which the depreciable cost of an asset is apportioned equally over its estimated life in terms of months or years is called the

Accepted Answer

The straight-line method spreads the cost of an asset evenly over its useful life, resulting in equal depreciation expenses each period.

Question 8

The loss of usefulness because of deterioration from age and wear is called

Accepted Answer

Physical depreciation refers to the loss of value due to wear and tear or aging of the asset. Functional depreciation refers to the loss of value because the asset no longer meets the needs of its intended purpose. Technological depreciation refers to the loss of value because of advances in technology that make the asset obsolete. Amortization refers to the gradual reduction of the value of an intangible asset over time.

Question 9

The depreciation method that estimates the number of units of service or output that can be provided by an asset and allocates the depreciable cost of the asset on the basis of the use or output during each period is called the

Accepted Answer

The units-of-production method is specifically designed for assets that are used to produce goods or services, and is therefore the best choice for allocating the depreciable cost of the asset based on the number of units of output that are produced. This method is particularly useful for assets that are expected to have varying levels of usage or output in different accounting periods. The other options (declining-balance method, sum-of-the-years'-digit method, and straight-line method) do not take into account the level of usage or output of the asset, and are therefore less appropriate for assets that are used to produce goods or services.

Question 10

The loss of usefulness because of inadequacy or obsolescence is called

Accepted Answer

Functional depreciation refers to the loss of usefulness of an asset due to inadequacy or obsolescence. Physical depreciation, on the other hand, refers to the actual wear and tear of the asset over time. Amortization and cost allocation are methods of spreading the cost of an asset over its useful life.

Question 11

The depreciation method using a steadily decreasing rate applied to the depreciable cost of the asset, resulting in successively smaller depreciation charges over the life of the asset is called the

Accepted Answer

The answer of The depreciation method using a steadily decreasing...

Question 12

Use the following data: $$\begin{array} { l r } 
\text { Asset cost } & \$ 120,000 \
\text { Expected life } & 4 \text { years } \
\text { Estimated salvage value } & \$ 12,000
\end{array}$$ ? Using the sum-of-the-years-digit method, the amount of depreciation for the third year would be

Accepted Answer

The sum-of-the-years-digits method calculates depreciation by multiplying the depreciable base by a fraction. The depreciable base is $120,000 - $12,000 = $108,000. The sum of the years' digits for 4 years is 1+2+3+4 = 10. For the third year, the fraction is 2/10. Therefore, the depreciation for the third year is $108,000 * (2/10) = $21,600.

Question 13

Assets that are NOT expected to provide benefits for a number of accounting periods are called

Accepted Answer

Assets that are not expected to provide benefits for a number of accounting periods are classified as current assets. Property, plant, and equipment, long-term assets, and fixed assets are all expected to provide benefits over multiple periods and are therefore classified as long-term assets.

Question 14

Use the following data: $$\begin{array} { l r } 
\text { Asset cost } & \$ 80,000 \
\text { Expected life } & 3 \text { years } \
\text { Estimated salvage value } & \$ 10,000
\end{array}$$ ? Using the sum-of-the-year's-digits method, the amount of depreciation for the first year would be

Accepted Answer

The answer of Use the following data: \[\begin{array} { l...

Question 15

Costs and assessments that should NOT be charged to the land account include

Accepted Answer

Costs of installing fences should not be charged to the land account, as fences are considered improvements or additions to the land, and should be recorded separately as a fixed asset. A, B, and D are all examples of costs that should be charged to the land account, as they are related to the initial purchase or development of the land itself.

Question 16

Which of the following is an example of a wasting asset?

Accepted Answer

A wasting asset is an asset that has a limited lifespan or loses value over time. Timber is an example of a wasting asset as it can only be harvested during certain stages of its growth and eventually decays or is used up. Land, equipment, and buildings can appreciate in value over time and are not considered wasting assets.

Question 17

The depreciation method using a fixed rate applied to the undepreciated cost of the asset each year, resulting in successively smaller depreciation charges as the undepreciated cost diminishes year by year is called the

Accepted Answer

The declining-balance method is exactly described in the given definition. The undepreciated cost is multiplied by a fixed rate each year, resulting in a decreasing depreciation charge as the value of the asset decreases over time. The other methods listed, such as the sum-of-the-years'-digit method and units-of-production method, use different formulas to calculate depreciation. The straight-line method is a fixed rate of depreciation each year on the original cost of the asset.

Question 18

A copyright is a federal grant of the exclusive right to the reproduction and sale of a literary, artistic, or musical composition for life plus 70 years after the death of the holder.

Accepted Answer

This is the definition of a copyright as established by U.S. law under the Copyright Act of 1976.

Question 19

Use the following data: $$\begin{array} { l c } 
\text { Asset cost } & \$ 80,000 \
\text { Expected life } & 3 \text { years } \
\text { Estimated salvage value } & \$ 7,000
\end{array}$$ Using the declining-balance method, the amount of depreciation for the first year would be

Accepted Answer