Chpt. 11 quiz assesses understanding of asset management in accounting, focusing on asset disposal, depreciation methods, and relevant GAAP disclosures. It evaluates comprehension of depreciation computation factors and application in real-world scenarios, enhancing financial reporting skills.
Increasing gains
Asset valuation
Cost allocation
Increasing net income
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True
False
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A length of loan, useful life, salvage value, and method of cost allocation
Useful life, length of loan, asset cost, and salvage
Asset cost, service life, residual value, and method of cost allocation
Asset cost, length of the loan, service life, and residual value
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25%
29%
20%
21.5%
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Units of input
Units of time
Units of output
Units of activity
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The accumulated depreciation for each major class of depreciable asset
The useful life of each major class of depreciable asset
The balances of major classes of depreciable assets
A general description of the method(s) used for depreciation
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Record keeping is simplified
Losses are not recognized in the period in which they occur
Faulty estimates are concealed for long periods
Gains are deferred beyond the point in which they actually occurred
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$2,666.67
$3,000
$3,333.33
$2,400
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Asset Cost * Estimated Residual Value = Depreciation Base
Asset Cost / Estimated Residual Value = Depreciation Base
Asset Cost - Estimated Residual Value = Depreciation Base
Asset Cost + Estimated Residual Value = Depreciation Base
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$7,000
$13,000
$0
$6,500
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A change in the depreciation method for currently owned assets is accounted for prospectively
Correction of an error in depreciation is accounted for as a prior period adjustment
A company may revise its estimate of service life and residual value as new or additional information becomres available
A company may never revise its estimated depreciation, the deprecation method originally selected, or correct an error
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The same, different
Different, different
The same, equal
Different, equal
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Abandonment
Purchase
Sale
Involuntary conversion
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Present value is lower than its fair value
Present value is higher than its fair value
Book value is lower than its fair value
Book value is higher than its fair value
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A current period operating loss occurs
Investing activities produce a negative cash flow
A significant change in the asset's estimated useful life occurs
The cost of constructing the asset are determined to be less than the budgeted amount
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Flood
Fire
Expropriated by a governmental unit
Sale at a loss
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The present value
The historical cost
The residual value
The depreciable value
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GAAP Requires the use of either straight-line or decline balance depreciation
One objective of depreciating an asset is to provide funds for replacement
Straight-line results in a decreasing amount of depreciation on total assets
Typically, the sum of the years' digits methods will result in less depreciation expense in the year of acquisition than will the double declining balance method
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Accumulated depreciation needs to be adjusted
Annual depreciation expense is the same
Subsequent years' depreciation expense is based upon annual changes in the asset's fair value
The reduced book value is used to compute future years' depreciation
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In the year of the write-down and the following year
In the year of the write down
In the year of the write-down and the following two years
In the following three years but not in the year of the write down
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Balances of major classes of depreciable assets by nature or function
Depreciation expense for each major class of asset
Accumulated Depreciation on each depreciable asset
An explanation of why the depreciation method used was selected by management
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Sum of the years digits method
Straight line method
Sinking fund method
Activity method
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No further depreciation is taken
Regular depreciation is taken
The asset is removed from the balance sheet
The asset is written down to the residual value
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20,000
16,000
32,000
40,000
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900
720
640
800
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7,475
4,271
8,000
8,543
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13.1%
10.1%
15.7%
18.2%
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Activity methods
Time based methods
Group methods
Cost methods
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7,200
8,000
7,800
7,600
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Debit accumulated depreciation for 8,800
Debit cash for 8,500
Credit delivery vans for 17,300
Credit loss on sale for 2,700
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True
False
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Depreciation is the process of allocating the purchase price of an asset minus its residual value to expense for each period benefited by the asset
The cost of an asset includes all acquisition costs necessary to obtain the benefits to be derived from the asset
The service life of an asset is the measure of the number of years of service expected from the asset before its disposal
The residual value of an asset is the difference between the expected book value of the asset at the end of its service and the costs of disposal
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Units of output
Units of activity
Units of input
Units of time
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Systematic
Rational
Systematic an rational
Systematic, rational, and reliable
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Operational use
Adequacy
Deterioration as a function of time
Obsolescence
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Method of cost allocation
Current value of the asset
Service life
Residual value of the asset
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Method of cost allocation
Service life
Present value
Residual value
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Units of time
Units of activity
Units of output
All of the above can measure service life
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Company policy
GAAP for each class of asset
IRFS
FASB
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Time based method
Accelerated method
Replacement method
Activity based method
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Sum of the years' digits method
Double declining balance method
Composite method
Compound interest method
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Straight line method
Units of production method
Sum of the years' digits method
Compound interest method
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Double declining balance method
Sum of the years' digits method
Inventory systems method
Group method
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Never, as one method must be applied consistently throughout the life of an asset
In the last quarter of the life of the asset
When the accelerated depreciation exceeds the straight line depreciation
Midpoint in the life of the asset
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The activity method of computing depreciation could result in zero depreciation expense in some periods of time
If the activity method is in use, residual value should not be subtracted from cost to determine the depreciation base
The activity method produces a constant total cost of depreciation each period
The activity method should be used when the service life of the asset is affected mostly by the passage of time
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7,600
6,500
7,000
14,000
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Cash 5,000 Accumulated Depreciation 4,000 Loss on Sale of Machine 1,000 Machines 10,000
Cash 5,000 Machines 5,000
Cash 5,000 Loss on Sale of Machine 5,000 Machines 10,000
Cash 5,000 Accumulated Depreciation 5,000 Machines 10,000
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