True/False Indicate whether the statement is true or
false.
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1.
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Wolford Stores, Inc., bought display shelves for $6,000.00. They have an
estimated salvage value of $1,000.00 and an estimated useful life of 5 years. The yearly depreciation
expense using the straight-line method is $1,000.00.
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2.
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No matter which depreciation method is used, the adjusting entry to record
depreciation involves a debit to Accumulated Depreciation and a credit to Depreciation
Expense.
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3.
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An asset's assessed value for property tax purposes may be different from
the asset's book value.
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4.
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According to the Realization of Revenue concept, the cost of a plant asset
should be allocated to an expense account over the useful life of the plant asset.
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5.
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After bringing depreciation up to date, Hosea Hardware discarded a display
cabinet with an original cost of $500.00, total accumulated depreciation of $450.00, and an estimated
salvage value of zero. The loss on the disposal is $50.00.
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6.
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Most businesses use the MACRS property class life to estimate the useful life of
a plant asset.
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7.
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Alexander Distributors bought store equipment for $10,000.00. It has an
estimated salvage value of $1,000.00 and an estimated useful life of 5 years. Using the straight-line
method, the book value at the end of year two would be $5,400.00.
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8.
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Starlite Wonders, Inc. received $250.00 cash from the sale of a printer. The
original cost of the printer was $900.00, its estimated salvage value was zero, and its total
accumulated depreciation was $800.00. The loss of the sale totaled $150.00.
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9.
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If a plant asset is used longer than its estimated useful life, depreciation is
not recorded once the book value equals the estimated salvage value.
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10.
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The actual value and book value of an asset are usually the same.
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Multiple Choice Identify the choice that best completes the
statement or answers the question.
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1.
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The value of an asset determined by tax authorities for the purpose of
calculating taxes is called ____.
A. | assessed value | C. | property tax value | B. | eminent domain value | D. | taxable value |
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2.
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Which of the following is NOT a way that a business disposes of a plant
asset?
A. | trading | C. | discarding | B. | selling | D. | devaluing |
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3.
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The method of depreciation calculated using the amount of production expected
from a plant asset is ____.
A. | declining-balance | C. | straight-line | B. | production-unit | D. | sum-of-the-years-digits |
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4.
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The total depreciation taken to date for a plant asset is found on the plant
asset record as ____.
A. | annual depreciation expense | C. | ending book
value | B. | accumulated depreciation | D. | total depreciation |
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5.
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The method of depreciation calculated by multiplying the book value at the end
of each fiscal period by a constant depreciation rate is ____.
A. | declining-balance | C. | straight-line | B. | production-unit | D. | sum-of-the-years-digits |
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6.
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Which of the following is true about the Modified Accelerated Cost Recovery
System?
A. | all plant assets are assumed to be placed in service the first day of the
year | B. | all plant assets are assumed to be taken out of service on the last day of the
year | C. | the depreciation rates are applied to the total cost of the plant assets without
considering the salvage value | D. | the depreciation rates are similar to the
straight-line rates |
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7.
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The method of depreciation that charges an equal amount of depreciation expense
for a plant asset in each year of its useful life is ____.
A. | declining-balance | C. | straight-line | B. | production-unit | D. | sum-of-the-years-digits |
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8.
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The original cost of a plant asset minus accumulated depreciation is called the
____.
A. | book value of a plant asset | B. | depreciable value of a plant
asset | C. | salvage value of a plant asset | D. | useful life of a plant
asset |
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9.
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Land and anything attached to it is called ____.
A. | depreciable property | C. | personal property | B. | land improvements | D. | real property |
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10.
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Figgins, Inc. purchased a truck that it expects to drive 100,000 miles over its
useful life. The cost of the truck was $32,000. Its estimated salvage value is $2,000, and its useful
life is expected to be 5 years. The depreciation rate that would be used for the production-unit
method would be ____.
A. | $0.30 per mile | C. | $6,000 | B. | $0.32 per mile | D. | $6,400 |
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11.
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The decrease in the value of a plant asset because of the removal of a natural
resource is ____.
A. | declining-balance | C. | production-unit | B. | depletion | D. | straight-line |
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12.
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When an asset is traded, the original cost of the new asset recorded in the
accounting records is ____.
A. | the cash paid minus the book value of the asset traded | B. | the cash paid minus
the original cost of the asset traded | C. | the cash paid plus the book value of the asset
traded | D. | the cash paid plus the original cost of the asset
traded |
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13.
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The method of depreciation calculated by using fractions based on the number of
years of a plant asset's useful life is ____.
A. | declining-balance | C. | straight-line | B. | production-unit | D. | sum-of-the-years-digits |
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14.
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The entry to discard equipment with book value after depreciation has been
brought up to date includes a ____.
A. | debit to Accumulated Depreciation–Equipment and a credit to
Equipment | B. | debits to Accumulated Depreciation–Equipment and Equipment and a credit to Gain
on Plant Assets | C. | debits to Accumulated Depreciation–Equipment and Loss on Plant Assets and a
credit to Equipment | D. | debit to Equipment and credits to Accumulated
Depreciation–Equipment and Loss on Plant Assets |
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15.
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The entry to record depreciation for part of a year is a ____.
A. | debit to Accumulated Depreciation–Equipment and a credit to Depreciation
Expense–Equipment | B. | debit to Depreciation Expense–Equipment
and a credit to Accumulated Depreciation–Equipment | C. | debit to
Depreciation Expense–Equipment and a credit to Income Summary | D. | debit to Income
Summary and a credit to Depreciation Expense–Equipment |
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