Question 1

When estimating the useful life of an asset, accountants do not consider

Accepted Answer

The cost to replace the asset at the end of its useful life is not considered when estimating the useful life of an asset. Accountants focus on factors like vulnerability to obsolescence, expected repairs and maintenance, and the intended use of the asset to determine its useful life.

Question 2

Equipment with a cost of $160,000, an estimated residual value of $10,000, and an estimated life of 4 years, was purchased on April 1, 2022.If the straight-line method is used, the depreciation expense for calendar 2022 is

Accepted Answer

The annual depreciation expense using the straight-line method is calculated as (Cost - Residual Value) / Useful Life. Here, it is ($160,000 - $10,000) / 4 = $37,500 annually. Since the equipment was purchased on April 1, only 9 months of depreciation applies for 2022. Thus, the depreciation expense for 2022 is $37,500 * (9/12) = $28,125.

Question 3

Which of the following is included in the cost of constructing a building?

Accepted Answer

The answer of Which of the following is included in...

Question 4

Assuming there are no impairment losses, the balance in the Accumulated Depreciation account represents the

Accepted Answer

The balance in the Accumulated Depreciation account represents the total amount charged to depreciation expense since the acquisition of the asset. This account accumulates the depreciation expense recorded each period, reflecting the portion of the asset's cost that has been allocated as an expense over its useful life.

Question 5

Which of the following is not an acceptable method of depreciation?

Accepted Answer

Increasing-balance is not a recognized method of depreciation. The correct term for a method that accelerates depreciation is "declining-balance" or "diminishing-balance," not "increasing-balance."

Question 6

The carrying amount of an asset is equal to the

Accepted Answer

The carrying amount of an asset is calculated as the asset's cost less its accumulated depreciation. This reflects the asset's book value over time as it depreciates.

Question 7

A company purchased factory equipment on May 1, 2022 for $30,000.It is estimated that the equipment will have a $4,200 residual value at the end of its 8-year useful life.Using straight-line depreciation, the depreciation expense for the years ended December 31, 2022 and 2023 is

Accepted Answer

The total depreciation over 8 years is $30,000 - $4,200 = $25,800. Annually, this is $25,800 / 8 = $3,225. For 2022, only 8 months (May-Dec) count, so the depreciation is $3,225 * (8/12) = $2,150. For 2023, a full year's depreciation is $3,225.

Question 8

Which of the following is not a consideration when calculating depreciation?

Accepted Answer

The method of payment for the asset is not a consideration when calculating depreciation. Depreciation calculations focus on the cost of the asset, its useful life, and its residual value, not on how the asset was paid for.

Question 9

Which statement is correct regarding the use of the cost model and the revaluation model?

Accepted Answer

The cost model is indeed the only model allowed under Accounting Standards for Private Enterprises (ASPE), which contrasts with International Financial Reporting Standards (IFRS) that allow for both the cost model and the revaluation model for certain types of assets.

Question 10

The diminishing-balance method of depreciation produces a(n)

Accepted Answer

The diminishing-balance method of depreciation results in a decreasing depreciation expense each period because it applies a constant rate to a decreasing book value.

Question 11

Equipment was purchased for $25,000.Freight charges amounted to $700 and there was a cost of $3,000 for building a foundation and installing the equipment.It is estimated that the equipment will have a $1,600 residual value at the end of its 5-year useful life.Using the straight-line method, annual depreciation expense will be

Accepted Answer

The answer of Equipment was purchased for $25,000.Freight charges amounted...

Question 12

A truck was purchased for $40,000 and it was estimated to have a $4,000 residual value.Using the straight-line method, monthly depreciation expense of $600 was recorded.Therefore, the annual depreciation rate expressed as a percentage is

Accepted Answer

The answer of A truck was purchased for $40,000 and...

Question 13

The carrying amount of an asset with a residual value that has been in use for three years is:

Accepted Answer

The carrying amount of an asset is calculated as the cost of the asset minus the accumulated depreciation.

Question 14

The cost of a depreciable long-lived asset is expensed

Accepted Answer

The cost of a depreciable long-lived asset is expensed over its useful life as it benefits the company, reflecting the consumption of the asset's economic benefits.

Question 15

The difference between a depreciable asset's cost and its residual value is called

Accepted Answer

The depreciable amount is the cost of an asset minus its residual value. This amount represents the total value that will be depreciated over the asset's useful life.

Question 16

Property, plant & equipment is subdivided into the following classes:

Accepted Answer

The answer of Property, plant & equipment is subdivided into...

Question 17

Equipment was purchased for $20,000.It is estimated that the equipment will have a $3,000 residual value at the end of its 5-year useful life.Using the straight-line method, annual depreciation expense will be

Accepted Answer

Depreciation expense = (Cost - Residual value) / Useful life= (20,000 - 3,000) / 5= 17,000 / 5= $3,400

Question 18

In calculating depreciation, residual value is

Accepted Answer

Residual value, also known as salvage value, is an estimate of the asset's value at the end of its useful life. It is considered when calculating depreciation to determine the total amount that will be depreciated over the asset's useful life.

Question 19

The carrying amount of property, plant, and equipment

Accepted Answer

The carrying amount of property, plant, and equipment (PP&E) is based on historical cost less any accumulated depreciation and impairment losses. This amount may be different than its fair value due to changes in market conditions, usage, and other factors affecting the value of the asset over time. Fair value can fluctuate above or below the carrying amount.

Question 20

Depreciation is a process of

Accepted Answer

Depreciation is the systematic allocation of the cost of a tangible asset over its useful life. It is not about determining fair or residual value, nor is it a method of valuing an asset in the market.

Quiz 9: Reporting and Analyzing Long-Lived Assets

When estimating the useful life of an asset, accountants do not consider