home page
chapter
10Select the appropriate response.
Incidental expenditures incurred when purchasing equipment (like freight, installation, and brokerage fees) that are ordinary and necessary for the acquisition should be:
expensed as incurred or included in an asset's cost
In an apportionment of the amount paid to acquire a package of assets, the amount assigned to a specific asset is based on its relative appraised value. The approach described relates to a:
cash purchase or lump-sum purchase
Which party pays the other for the use of property?
Under which type of lease does the lessee obtain the rights to use leased property for a limited period of time and treat amounts paid as expense?
operating lease or capital lease
The process used to allocate the cost of long-lived assets to the accounting periods benefited is known as:
Depreciation is a process of:
The term "service life" is synonymous with:
physical life or economic life
Business growth may cause certain items of depreciable property, plant, and equipment to become deficient in their service capabilities. Such action is termed:
physical deterioration or inadequacy
Asset cost minus residual value is termed:
book value or depreciable base
Under the units-of-output depreciation method, the depreciable base is divided by the service life:
Under double-declining balance depreciation, salvage value is ignored in the preliminary depreciation calculation.
Sum-of-the-years'-digits depreciation for an asset acquired during the middle of a year may involve the utilization of two different fractional rates in determining depreciation for a full year.
The straight-line method generally results in the highest possible (as compared to accelerated depreciation methods) depreciation expense during an asset's early years of usage.
For an asset with a five-year life, depreciation expense during the third year will be the same under the straight-line and:
sum-of-the-years'-digits method or double-declining balance method
In addition to a change in estimated service life, what other type of change would likely result in a revision of depreciation amounts?
change in useful life or change in accumulated depreciation
The process to adjust depreciation for a change in service life entails spreading the remaining depreciable base over the remaining useful life.
The Modified Accelerated Cost Recovery System is primarily used for:
tax purposes or financial reporting purposes
A company must utilize the same depreciation methods for financial reporting and taxes purposes.