Question 1

The double-declining-balance method of depreciation uses a declining percentage rate in determining the depreciation amount.

Accepted Answer

The answer of The double-declining-balance method of depreciation uses a...

Question 2

When depreciation estimates are revised,all years of the asset's life are affected.

Accepted Answer

When depreciation estimates are revised, it affects the depreciation expense calculation for the current and future periods only, not the past periods.

Question 3

When selling a piece of equipment for cash,a loss will result when the proceeds of the sale are less than the book value of the asset.

Accepted Answer

This is correct, as book value represents the cost of the asset minus accumulated depreciation, so selling for less than book value means the asset is being sold for less than its recorded value on the company's books.

Question 4

An estimate of the amount for which an asset can be sold at the end of its useful life is called residual value.

Accepted Answer

Residual value is the estimated amount for which an asset can be sold at the end of its useful life.

Question 5

Residual value is not incorporated in the initial calculations for double-declining-balance depreciation.

Accepted Answer

Double-declining-balance depreciation method does not consider the residual value of an asset while calculating the depreciation expense. In this method, the depreciation rate is double the straight-line depreciation rate and it is applied to the book value of the asset each year until it reaches its salvage value or the end of its useful life.

Question 6

Regardless of the depreciation method,the amount that will be depreciated during the life of the asset will be the same.

Accepted Answer

The total amount to be depreciated over the life of the asset will be the same, regardless of the depreciation method used. However, the amount of depreciation recognized in each accounting period may be different depending on the method used.

Question 7

The amount of depreciation expense for the first full year of use of a fixed asset costing $95,000,with an estimated residual value of $5,000 and a useful life of five years,is $19,000 by the straight-line method.

Accepted Answer

The answer of The amount of depreciation expense for the...

Question 8

It is necessary for a company to use the same depreciation method for all of its depreciable assets.

Accepted Answer

A company can use different depreciation methods for different types of assets based on factors such as estimated useful life, salvage value, and expected pattern of future benefits. However, the chosen depreciation method should be consistent and applied uniformly across all assets of the same type.

Question 9

The double-declining-balance method is an accelerated depreciation method.

Accepted Answer

The double-declining-balance method is an accelerated depreciation method that allocates a higher percentage of an asset's cost in early years of use and decreases the percentage used in later years. This results in higher depreciation expense in the earlier years and lower depreciation expense in the later years.

Question 10

The difference between the balance in a fixed asset account and its related accumulated depreciation account is the asset's book value.

Accepted Answer

This is correct. The book value of a fixed asset is calculated by subtracting its accumulated depreciation from its original cost or acquisition value.

Question 11

The depreciable cost of a building is the same as its acquisition cost.

Accepted Answer

The depreciable cost of a building is the cost of the building minus the estimated salvage value, which is the resale value of the building at the end of its useful life. Therefore, the depreciable cost is usually lower than the acquisition cost.

Question 12

The amount of the depreciation expense for the second full year of use of a fixed asset costing $100,000,with an estimated residual value of $5,000 and a useful life of four years,is $25,000 by the double-declining-balance method.

Accepted Answer

The double-declining-balance method calculates depreciation by multiplying the book value of the asset by a fixed rate, which is double the straight-line rate. The straight-line rate can be calculated by dividing the depreciable cost (cost - salvage value) by the useful life.

In this case, the depreciable cost is $100,000 - $5,000 = $95,000 and the straight-line rate is $95,000 / 4 = $23,750 per year. The double-declining-balance rate is therefore 2 * $23,750 = $47,500 per year.

For the second full year of use, the book value of the asset at the beginning of the year is $100,000 - $47,500 = $52,500. The depreciation expense for the year is therefore $52,500 * 2 = $105,000. However, since the remaining book value cannot be less than the estimated residual value, the depreciation expense is limited to $52,500 - $5,000 = $47,500.

Therefore, the amount of the depreciation expense for the second full year of use of a fixed asset costing $100,000, with an estimated residual value of $5,000 and a useful life of four years, is $47,500 by the double-declining-balance method, and the statement in the question is false.

Question 13

Though a piece of equipment is still being used,the equipment should be removed from the accounts if it has been fully depreciated.

Accepted Answer

Fully depreciated equipment should remain on the accounts, reflecting its historical cost and accumulated depreciation until it is disposed of, even if its book value is zero.

Question 14

The double-declining-balance depreciation method calculates depreciation each year by taking twice the straight-line rate times the book value of the asset at the beginning of each year.

Accepted Answer

This is the correct formula for calculating depreciation using the double-declining-balance method.

Question 15

Capital expenditures are costs that are charged to stockholders' equity accounts.

Accepted Answer

Capital expenditures are expenses that result in the acquisition or improvement of a long-term asset, such as property, plant, and equipment. These costs are not charged to stockholders' equity accounts but rather are capitalized as assets on the balance sheet and then gradually depreciated over their useful lives.

Question 16

The amount of depreciation expense for a fixed asset costing $95,000,with an estimated residual value of $5,000 and a useful life of five years or 20,000 operating hours,is $21,375 by the units-of-activity method during a period when the asset was used for 4,500 hours.

Accepted Answer

The depreciation expense using the units-of-activity method is calculated based on the actual usage of the asset. The formula is: [(Cost - Residual Value) / Total Estimated Usage] * Actual Usage. In this case, it would be [($95,000 - $5,000) / 20,000 hours] * 4,500 hours = $20,250.

Question 17

Revising depreciation estimates affects the amounts of depreciation expense recorded in past periods.

Accepted Answer

Revising depreciation estimates affects the depreciation expense in the current and future periods, not past periods. Past financial statements are not retroactively adjusted for changes in depreciation estimates.

Question 18

Once the useful life of a depreciable asset has been estimated and the amount to be depreciated each year has been determined,the amounts cannot be changed.

Accepted Answer

The estimated useful life and the amount to be depreciated each year can be revised based on changes in the asset's condition or usage. A company can also choose to change the method of depreciation used for an asset, which may affect the amount of depreciation expense recognized each year.

Question 19

It is not necessary for a company to use the same depreciation method for all of its fixed assets.

Accepted Answer

A company can choose different depreciation methods for different assets based on their expected useful life, salvage value and other factors.

Question 20

The units-of-activity depreciation method provides a good match of expenses against revenue.

Accepted Answer

The units-of-activity depreciation method matches depreciation expenses to the actual usage of an asset, making it a good match against revenue generated by that asset. Therefore, the statement is true.

Quiz 10: Long-Term Assets: Fixed and Intangible