Question 1

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

Accepted Answer

The depreciable cost of a building takes into account the salvage value and estimated useful life of the building, so it is usually lower than the acquisition cost.

Question 2

The double-declining-balance method of depreciation uses a declining percentage rate in determining the depreciation amount.

Accepted Answer

The answer of The double-declining-balance method of depreciation uses a...

Question 3

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 four years, is $25,000 by the double-declining-balance method.

Accepted Answer

The double-declining-balance method depreciates an asset by a fixed percentage each year. In this case, the fixed percentage is 50%, which is double the straight-line rate of 25% (100% divided by the useful life of 4 years).

Year 1: Depreciation expense = ($100,000 - $5,000) x 50% = $47,500
Year 2: Depreciation expense = ($100,000 - $5,000 - $47,500) x 50% = $25,125

Therefore, the depreciation expense for the second full year of use is $25,125, which is approximately equal to $25,000.

Question 4

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 five years, is $19,000 by the straight-line method.

Accepted Answer

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

Question 5

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

Accepted Answer

The units-of-activity depreciation method matches the depreciation expense with the actual usage or activity of the asset, making it a good match of expenses against revenue. This method is particularly useful for assets that are used heavily during certain periods and have low or no usage during other periods.

Question 6

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

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

Question 7

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

Accepted Answer

Capital expenditures are costs associated with acquiring or improving long-term assets such as buildings, equipment, or land. These costs are not charged to stockholders' equity accounts but are instead recorded as assets on the balance sheet and depreciated over their useful lives.

Question 8

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

Accepted Answer

Double-declining-balance depreciation method does not take into account the residual value of the asset while calculating the depreciation expense. It only considers the useful life and the acquisition cost of the asset.

Question 9

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 five years or 20,000 operating hours, is $21,375 by the units-of-activity method during a period when the asset was used for 4,500 hours.

Accepted Answer

The depreciation expense using the units-of-activity method is calculated based on the actual usage of the asset. The formula is: [(Cost - Residual Value) / Total Estimated Usage] * Actual Usage. So, for an asset costing $95,000 with a residual value of $5,000 and a total estimated usage of 20,000 hours, the depreciation per hour is ($95,000 - $5,000) / 20,000 = $4.50 per hour. For 4,500 hours of usage, the depreciation expense would be 4,500 hours * $4.50/hour = $20,250, not $21,375.

Question 10

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

Accepted Answer

The double-declining-balance method is an accelerated depreciation method where the depreciation expense is higher in the early years of an asset's life and gradually decreases over time.

Question 11

The difference between the balance in a fixed asset account and its related accumulated depreciation account is the asset's book value.

Accepted Answer

This statement is true. The book value of a fixed asset is calculated by subtracting the accumulated depreciation from the original cost, and this difference can be seen by comparing the balance in the fixed asset account and the related accumulated depreciation account.

Question 12

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 amount to be depreciated each year can be revised if there is a change in the estimated useful life or salvage value of the asset. It is also possible to change depreciation methods, but any adjustments should be made prospectively, not retroactively.

Question 13

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

Accepted Answer

Revising depreciation estimates affects the calculation of depreciation expense for the current and future periods, not past periods.

Question 14

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 15

It is not necessary for a company to use the same depreciation method for all of its fixed assets.

Accepted Answer

A company may choose different depreciation methods for different types of fixed assets depending on factors such as the asset's expected useful life and the company's accounting practices.

Question 16

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

This is because residual value is the estimated value of an asset at the end of its useful life, which can be used to calculate depreciation for accounting purposes.

Question 17

Though a piece of equipment is still being used, the equipment should be removed from the accounts if it has been fully depreciated.

Accepted Answer

Fully depreciating an asset does not mean it should be removed from the accounts; it simply means its cost has been fully allocated over its useful life. The asset remains on the balance sheet at its residual value until it is disposed of.

Question 18

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

Accepted Answer

A company may choose to use different depreciation methods for different types of assets, depending on their useful lives, expected resale value, and other factors. However, the company must consistently apply each depreciation method to all assets within the same class, as defined by the tax code or accounting rules.

Question 19

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 amount of depreciation to be charged over the life of an asset will remain the same, regardless of the method used to calculate it. However, the annual depreciation amount may differ depending on the method used.

Question 20

When selling a piece of equipment for cash, a loss will result when the proceeds of the sale are less than the book value of the asset.

Accepted Answer

This is true. The book value of an asset represents its value on the company's books, while the proceeds of the sale are the actual cash received. If the sale price is less than the book value, a loss will result.

Quiz 10: Long-Term Assets: Fixed and Intangible