Deck 7: Tangible Fixed Assets

Question 1

It is appropriate to use the straight-line method of depreciation if the decline of service potential relates primarily to the passage of time rather than to the level of activity,and if it can be assumed the asset will be equally productive each year.

Answer 1

True

Question 2

The book value (or carrying amount)is:

A) The difference between the asset's cost and the balance of its accumulated depreciation.
B) The difference between the asset's cost and the depreciation expense of the year.
C) The difference between the asset's purchase price and the other directly attributable costs.
D) None of these

Answer 2

A

Question 3

Fixed assets can be divided into which three categories?

A) Buildings,equipment and goodwill
B) Ordinary,financial and extraordinary
C) Tangible,intangible and financial
D) None of these

Answer 3

C

Question 4

What is the most commonly accepted useful life for furniture?

A) 3 years
B) 5 years
C) 10 years
D) 20 years

Question 5

When using the systematic manner,the computation of the depreciation expense is based on a formula,which was decided at,or before,the time of acquisition and can be modified several times during the life of the asset.

Question 6

For which class of assets is the productive output method particularly appropriate?

A) Land
B) Buildings
C) Office furniture
D) Manufacturing equipment

Question 7

How is the depreciation expense calculated using the productive output method?

A) Depreciation expense = (Depreciable amount/Life expressed in units of output)× Units of output for period
B) Depreciation expense = Depreciable amount/Units of output for period
C) Depreciation expense = Depreciable amount × Units of output for period
D) Depreciation expense = Depreciable amount/Life expressed in units of output

Question 8

Which of the following equations is correct?

A) Depreciable amount = Acquisition cost + Estimated residual value
B) Depreciable amount = Purchase price - Estimated residual value
C) Depreciable amount = Acquisition cost - Estimated residual value
D) Depreciable amount = Purchase price + Estimated residual value

Question 9

What is another name for tangible assets?

A) Plant assets
B) Operational assets
C) Property,plant and equipment
D) All of these

Question 10

How can the main depreciation methods be classified?

A) Time-based and cost-based methods
B) Time-based and activity level-based methods
C) Production-based and activity level-based methods
D) None of these

Question 11

The cost of a tangible asset is allocated over time.What is systematic allocation designed to reflect?

A) The recognition of some form of unpredictable event that modifies the value of the asset
B) An ongoing process of consumption.
C) An unusual loss in value.
D) None of these

Question 12

A multiple is needed to use the declining balance method of depreciation.How is the multiple chosen?

A) All around the world,the choice is completely open.
B) In every country,the tax authorities have defined,for each class of assets,a standardized multiple.
C) The multiple is always equal to two.
D) The selection of the multiple varies greatly from country to country.

Question 13

How is the useful life of a tangible asset defined?

A) The period of time over which an asset is expected to be used by the entity.
B) The number of production output or similar units expected to be obtained from the asset by the entity.
C) a or b
D) Neither a nor b

Question 14

What is the objective of any accelerated depreciation method?

A) To recognize greater amounts of depreciation in the later years of an asset's life and smaller amounts in the early years
B) To recognize greater amounts of depreciation in the early years of an asset's life and smaller amounts in the later years
C) To recognize stable amounts of depreciation in both the early and in the later years of an asset's life
D) To accelerate the computation of the depreciation expense by the accountants.

Question 15

Which criterion (criteria)should capital expenditures meet?

A) The quantity of services from the asset will be increased through a longer useful life.
B) The quantity of services from the asset will be increased with more units of output.
C) The quality of the service received from using the asset will be increased.
D) Capital expenditures should meet at least one of the previous criteria.

Question 16

How is the depreciation expense calculated using the service quantity method?

A) Depreciation expense = Depreciable amount/Total quantity of productive service
B) Depreciation expense = (Depreciable amount/Total quantity of productive service)× Productive service for period
C) Depreciation expense = Depreciable amount/Productive service for period
D) Depreciation expense = Depreciable amount × Productive service for period

Question 17

Acquisition cost is the amount of cash or cash equivalents paid,or the fair value of the other consideration given,to acquire an asset at the time of its acquisition.

Question 18

What is the distinguishing feature of a tangible asset compared to other fixed assets?

A) A tangible asset has a physical substance.
B) A tangible asset is subject to a reduction of its value over time.
C) A tangible asset is a long-lived asset.
D) A tangible asset is used in the course of the operations of the business and is not acquired for the purpose of resale.

Question 19

What is the unsystematic cost allocation called?

A) Depreciation
B) Amortization
C) Depletion
D) Impairment

Question 20

If an airplane jet engine which is kept in inventory to be used during maintenance operations or for a replacement,is treated as a tangible asset,which of the following statements is true?

A) It is never subject to depreciation.
B) It is subject to an annual depreciation expense even before being brought into operational use.
C) It is subject to an annual depreciation expense only when it is brought into operational use.
D) None of these

Question 21

IAS 16 defines an 'impairment loss' as 'the amount by which the carrying amount of an asset exceeds its recoverable amount.'

Question 22

Under certain circumstances,the interest costs must be included in the cost of construction.What is this known as?

A) Inclusion of interest costs
B) Capitalization of interest costs
C) Recognition of interest costs
D) Computation of interest costs

Question 23

What is the term used for the specific depreciation of lands purchased as natural resources for a productive activity?

A) Depreciation
B) Depletion
C) Amortization
D) Impairment

Question 24

At the time of capitalization of the costs incurred in the construction of the asset,expenses pertaining to the new asset must go through the income statement.

Question 25

Under what circumstances are costs incurred after the acquisition of an asset (such as additions,improvements,or replacements),added to the asset's depreciable amount?

A) They provide future service potential.
B) They extend the useful life of the asset.
C) They increase either the quantity or quality of service rendered by the asset.
D) All of these

Question 26

Which of the following equations is correct?

A) Gross value at the beginning of the period + Acquisitions of the period - Disposals of the period = Gross value at the end of the period
B) Gross value at the beginning of the period - Acquisitions of the period - Disposals of the period = Gross value at the end of the period
C) Gross value at the beginning of the period + Acquisitions of the period + Disposals of the period = Gross value at the end of the period
D) Gross value at the beginning of the period - Acquisitions of the period + Disposals of the period = Gross value at the end of the period