Question 1

Depreciation is a process of

Accepted Answer

Depreciation is the process of allocating the cost of a tangible asset over 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, 2018. If the straight-line method is used, the depreciation expense for calendar 2018 is

Accepted Answer

The answer of Equipment with a cost of $160,000, an...

Question 3

In calculating depreciation, residual value is

Accepted Answer

Residual value is the estimated value of an asset at the end of its useful life, which is used to calculate the depreciable cost of the asset.

Question 4

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

The answer of Equipment was purchased for $20,000. It is...

Question 5

The cost of a depreciable long-lived asset is expensed

Accepted Answer

The cost of a depreciable long-lived asset is expensed as the asset benefits the company. This is because the asset is expected to provide benefits over multiple periods, so its cost should be spread out over those periods.

Question 6

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

Accepted Answer

Under ASPE (Accounting Standards for Private Enterprises), only the cost model is allowed for measuring property, plant, and equipment. The revaluation model is not permitted under ASPE.

Question 7

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 8

The carrying amount of property, plant, and equipment

Accepted Answer

The carrying amount of property, plant, and equipment is the value at which these assets are recognized on the balance sheet, which may differ from their fair value due to factors like depreciation, impairment, or market conditions.

Question 9

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

Accepted Answer

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

Question 10

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, which is the amount that can be depreciated over the asset's useful life.

Question 11

A company purchased factory equipment on May 1, 2018 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, 2018 and 2019 is

Accepted Answer

The annual depreciation expense is calculated as ($30,000 - $4,200) / 8 = $3,225. For 2018, depreciation is for 8 months (May to December), so $3,225 * (8/12) = $2,150. For 2019, it's the full year, so $3,225.

Question 12

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.

Question 13

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...

Question 14

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 minus accumulated depreciation.

Question 15

Use the following information for questions.
On January 1, 2018, Anvil Corp. purchased equipment for $60,000. It was expected to last 5 years, after which it will be sold for $5,000. It is expected to be used for a total of 10,000 machine hours, and was used for 750 hours during the year ended December 31, 2018.
-The depreciation expense for 2018 using the straight-line method will be

Accepted Answer

The answer of Use the following information for questions.
On January...

Question 16

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 17

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

Accepted Answer

The increasing-balance method is not a recognized method of depreciation. The other options are standard methods used to allocate the cost of an asset over its useful life.

Question 18

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

Accepted Answer

The Accumulated Depreciation account represents the total amount of depreciation expense that has been recorded against an asset since its acquisition.

Question 19

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

Accepted Answer

When estimating the useful life of an asset, accountants do consider expected repairs and maintenance, vulnerability to obsolescence, and intended use of the asset. However, they do not consider the cost to replace the asset at the end of its useful life.

Question 20

Use the following information for questions.
On January 1, 2018, Anvil Corp. purchased equipment for $60,000. It was expected to last 5 years, after which it will be sold for $5,000. It is expected to be used for a total of 10,000 machine hours, and was used for 750 hours during the year ended December 31, 2018.
-The depreciation expense for 2018 using the units-of-production method will be

Accepted Answer

The units-of-production method calculates depreciation based on usage. The formula is: (Cost - Salvage Value) / Total Estimated Units of Production. Here, it's ($60,000 - $5,000) / 10,000 hours = $5.50 per hour. For 750 hours, the depreciation is 750 * $5.50 = $4,125.

Quiz 9: Reporting and Analyzing Long-Lived Assets