Question 1

Which of the following statements most appropriately describes the purpose of amortization of a long-lived tangible asset?
A)To indicate how the asset has physically deteriorated.
B)To show that the asset will eventually and gradually become obsolete.
C)To record that the asset's market value declines over time.
D)To match the cost of the asset to the period in which it generates revenue.

Accepted Answer

Amortization is the process of allocating the cost of a long-lived tangible asset over its useful life. The purpose of this is to match the cost of the asset to the period in which it generates revenue. This is a way of recognizing the expense of the asset over time, rather than all at once. Amortization has nothing to do with the physical condition or market value of the asset.

Question 2

After the early years of an asset's life,accelerated amortization methods:
A)cause an asset to be carried at a higher book value than the straight-line method.
B)cause an asset to be carried at a lower book value than the straight-line method.
C)cause an asset to be carried at the same book value as the straight-line method.
D)cannot be used if the resulting book value will be significantly different from that which would result from using the straight-line method.

Accepted Answer

Accelerated amortization methods result in higher depreciation or amortization expenses in the early years of an asset's life and lower expenses in the later years. As a result, the book value of the asset is reduced faster in the early years, causing it to be carried at a lower book value than the straight-line method.

Question 3

?
A)$21,600
B)$22,000
C)$22,400
D)$34,000

Accepted Answer

The answer of ?
A)$21,600
B)$22,000
C)$22,400
D)$34,000...

Question 4

Purrfect Pets has a facility that originally cost $375,000.The balance of the accumulated amortization account for the facility is $258,000.The company expects to be able to sell the facility for $107,000 at the end of its useful life.The residual value of the facility is:
A)$117,000.
B)$151,000.
C)$268,000.
D)$107,000

Accepted Answer

The residual value of the facility is the estimated amount that the company will receive from selling the facility at the end of its useful life. As given in the question, the estimated selling price at the end of the facility's useful life is $107,000. Therefore, the residual value of the facility is $107,000. Option D is the correct answer.

Question 5

The Widget Tool and Die Company buys a $400,000 stamping machine that has an estimated residual value of $20,000.The company expects the machine to produce two million units.It makes 400,000 units during the current period.If the units-of-production method is used,the amortization expense for this period is:
A)$80,000.
B)$400,000.
C)$76,000.
D)$380,000.

Accepted Answer

The formula for calculating amortization expense using the units-of-production method is:

Amortization expense = (cost - residual value) x (units produced in current period / total estimated units of production)

Plugging in the given values, we get:

Amortization expense = ($400,000 - $20,000) x (400,000 / 2,000,000) = $76,000

Therefore, the answer is C, $76,000.

Question 6

The book or carrying value of an asset is:
A)its acquisition cost less the accumulated amortization from the acquisition date to the balance sheet date.
B)its acquisition cost plus accumulated amortization from the acquisition date to the balance sheet date.
C)the amount that could be obtained for the asset on the balance sheet date if it were sold.
D)the annual cost of carrying the asset in inventory.

Accepted Answer

The book value or carrying value of an asset is the acquisition cost less the accumulated amortization from the acquisition date to the balance sheet date. This represents the net value of the asset on the company's books. Option B is incorrect because it adds accumulated amortization to the acquisition cost, which would result in a higher value. Option C is incorrect because this represents the fair market value of the asset, which may not be the same as the book value. Option D is incorrect because it refers to the cost of carrying an asset in inventory, which may not be the same as the book value.

Question 7

What is the amortization expense for 2009?
A)$4,000.
B)$3,000.
C)$6,000.
D)$8,000.

Accepted Answer

The answer of What is the amortization expense for 2009?
A)$4,000.
B)$3,000.
C)$6,000.
D)$8,000....

Question 8

A company expects to use equipment that cost $48,000 for ten years and then sell it for $6,000.Using the straight-line method,the company should report amortization for the equipment of:
A)$4,200 per year.
B)$8,400 per year.
C)$4,800 per year.
D)$9,600 per year.

Accepted Answer

The straight-line method of amortization involves subtracting the salvage value from the initial cost and then dividing by the useful life. Here, ($48,000 - $6,000) / 10 years = $4,200 per year.

Question 9

Purrfect Pets has a facility that originally cost $375,000.The balance of the accumulated amortization account for the facility is $258,000.The company expects to be able to sell the facility for $107,000 at the end of its useful life.The amortizable cost of the facility is:
A)$117,000.
B)$151,000.
C)$268,000.
D)$107,000

Accepted Answer

The amortizable cost is calculated as the original cost minus the expected salvage value: $375,000 - $107,000 = $268,000.

Question 10

A company buys a piece of equipment for $48,000.The equipment has a useful life of ten years.Using the double-declining-balance method,the company's amortization expense in the first year would be:
A)$9,600.
B)$12,000.
C)$4,800.
D)$24,000.

Accepted Answer

The double-declining-balance method multiplies the book value of the asset by a rate that is twice the straight-line depreciation rate. The straight-line depreciation rate is calculated by dividing 100% by the useful life of the asset. In this case, the useful life is 10 years, so the straight-line depreciation rate is 10%. The double-declining-balance rate is therefore 20%.The book value of the asset in the first year is $48,000. Multiplying this by the double-declining-balance rate of 20% gives an amortization expense of $9,600.

Question 11

Your company buys a computer server,which it expects to use for eight years and then sell when it upgrades to a more powerful model.The server would probably be used by the business that buys it at that time for another three years.The useful life of the server for your company is:
A)the total length of time the server is used to produce output for your company.
B)eleven years.
C)the total length of time until the server can no longer function.
D)three years.

Accepted Answer

The useful life of the server for your company is the total length of time the server is used to produce output for your company. In this case, it is the full eight years that your company plans on using the server. The additional three years that another business might use the server is not relevant to your company's use of the server.

Question 12

ShadyZ Corporation uses the unit-of-production method to estimate amortization.A new asset is purchased for $18,000 that will produce an estimated 100,000 units over its useful life.Estimated residual value is $2,000.What is the amortization rate per unit?
A)$1.60
B)$1.80
C)$0.16
D)$0.18

Accepted Answer

To calculate the amortization rate per unit, we need to first calculate the depreciable cost per unit, which is (Cost - Residual value) / Total estimated units of production.

Thus, depreciable cost per unit = ($18,000 - $2,000) / 100,000 = $0.16

Therefore, the amortization rate per unit is equal to the depreciable cost per unit, which is $0.16. Hence, the correct answer is C.

Question 13

A piece of equipment was acquired on January 1,2009,at a cost of $22,000,with an estimated residual value of $2,000 and an estimated useful life of four years.The company uses the double-declining-balance method.What is its book value at December 31,2010?
A)$5,500
B)$10,000
C)$11,000
D)$12,000

Accepted Answer

The double-declining-balance method is a depreciation method that allocates a larger portion of the depreciation expense to the earlier years of an asset's life. The formula for double-declining-balance depreciation is:Depreciation expense = (2 * Straight-line depreciation rate) * Book valueThe straight-line depreciation rate is calculated by dividing the depreciable cost of the asset (cost - residual value) by the estimated useful life of the asset.In this case, the depreciable cost of the asset is $22,000 - $2,000 = $20,000. The estimated useful life of the asset is four years. Therefore, the straight-line depreciation rate is 25% (100% / 4).The book value of the asset at December 31, 2010, is $22,000 - ($20,000 * 25% * 2) = $11,000.

Question 14

One difference between the double-declining-balance method and the straight-line method is that the double-declining-balance method:
A)takes book value below residual value.
B)does not consider the useful life of the asset in the calculation of amortization.
C)cannot be used for tax purposes.
D)uses book value instead of depreciable cost in the calculation of amortization.

Accepted Answer

The double-declining-balance method uses book value instead of depreciable cost in the calculation of amortization. This results in a higher depreciation expense in the early years of the asset's life, which reflects the higher wear and tear during that period. The straight-line method, on the other hand, divides the depreciable cost by the useful life of the asset to determine the same annual depreciation expense for each year.

Question 15

Paul Hauling has a fleet of 10 large trucks that cost a total of $1,410,000.The fleet is expected to provide 1,000,000 miles of transportation during an estimated 10-year life,and be sold for 10% of the original cost at the end of that time.If the fleet traveled 125,000 miles in the current twelve-month period,what would be the amortization expense under the straight-line (SL)and units-of-production (UoP)methods?
A)SL = $158,625 & UoP = $141,000
B)SL = $141,000 & UoP = $158,625
C)SL = $126,900 & UoP = $176,250
D)SL = $126,900 & UoP = $158,625

Accepted Answer

Under the SL method, the annual depreciation is calculated as (Cost - Salvage Value) / Useful Life = ($1,410,000 - $141,000) / 10 = $126,900. Under the UoP method, the depreciation per mile is (Cost - Salvage Value) / Total Miles = ($1,410,000 - $141,000) / 1,000,000 = $1.269 per mile. For 125,000 miles, the expense is 125,000 * $1.269 = $158,625.

Question 16

The Widget Tool and Die Company buys a $400,000 stamping machine that has an estimated residual value of $20,000.The company expects the machine to produce two million units.It makes 400,000 units during the current period.If the units-of-production method is used,the amortization rate is:
A)$0.95 per unit.
B)$0.19 per unit.
C)$0.05 per unit.
D)$1.00 per unit.

Accepted Answer

To calculate the amortization rate per unit using the units-of-production method, we need to subtract the residual value from the cost of the machine and then divide by the estimated number of units it can produce over its useful life:

Amortization rate per unit = (Cost of machine - Residual value) / Estimated number of units
Amortization rate per unit = ($400,000 - $20,000) / 2,000,000
Amortization rate per unit = $380,000 / 2,000,000
Amortization rate per unit = $0.19

Therefore, the answer is B, $0.19 per unit.

Question 17

If the double-declining balance method were used to amortize a building that has a 10-year useful life and a residual value equal to 10% of the building's original cost,what amortization rate would be used?
A)9%
B)10%
C)18%
D)20%

Accepted Answer

The double-declining balance method uses twice the straight-line depreciation rate. For a 10-year useful life, the straight-line rate is 10% (100% / 10 years). Therefore, the double-declining rate is 20% (2 x 10%).

Question 18

What is the adjusted balance in the Accumulated amortization account at the end of 2010?
A)$3,200
B)$4,800
C)$9,600.
D)$12,800.

Accepted Answer

The answer of What is the adjusted balance in the...

Question 19

Which of the following statements is true when the straight-line method is used to compute amortization?
A)The carrying value of an asset is a constant amount during the asset's useful life.
B)Accumulated amortization is a constant amount during the asset's estimated useful life.
C)Amortization expense per period is the amortizable cost divided by the number of periods in the asset's useful life.
D)None of the above.

Accepted Answer

The straight-line method of amortization allocates the cost of an asset equally over its estimated useful life. Therefore, amortization expense per period is the amortizable cost divided by the number of periods in the asset's useful life. The carrying value of an asset decreases over time as its accumulated amortization increases, so option A is incorrect. Option B is incorrect because accumulated amortization increases over time until it equals the asset's cost, at which point no further amortization is recorded.

Question 20

A company bought a piece of equipment for $40,000,expecting to use it for eight years.The company then plans to sell it for $3,500.The company has already recorded amortization of $35,995.Using the double-declining-balance method,the company's annual amortization expense for the upcoming year would be:
A)$1,001.
B)$9,125.
C)$505.
D)$10,000.

Accepted Answer

The answer of A company bought a piece of equipment...

Quiz 9: Long-Lived Tangible and Intangible Assets

Which of the following statements most appropriately describes the purpose of amortization of a long-lived tangible asset?

After the early years of an asset's life,accelerated amortization methods:

?

Purrfect Pets has a facility that originally cost $375,000.The balance of the accumulated amortization account for the facility is $258,000.The company expects to be able to sell the facility for $107,000 at the end of its useful life.The residual value of the facility is:

The book or carrying value of an asset is:

What is the amortization expense for 2009?

A company expects to use equipment that cost $48,000 for ten years and then sell it for $6,000.Using the straight-line method,the company should report amortization for the equipment of:

Purrfect Pets has a facility that originally cost $375,000.The balance of the accumulated amortization account for the facility is $258,000.The company expects to be able to sell the facility for $107,000 at the end of its useful life.The amortizable cost of the facility is:

A company buys a piece of equipment for $48,000.The equipment has a useful life of ten years.Using the double-declining-balance method,the company's amortization expense in the first year would be:

Your company buys a computer server,which it expects to use for eight years and then sell when it upgrades to a more powerful model.The server would probably be used by the business that buys it at that time for another three years.The useful life of the server for your company is:

ShadyZ Corporation uses the unit-of-production method to estimate amortization.A new asset is purchased for $18,000 that will produce an estimated 100,000 units over its useful life.Estimated residual value is $2,000.What is the amortization rate per unit?

A piece of equipment was acquired on January 1,2009,at a cost of $22,000,with an estimated residual value of $2,000 and an estimated useful life of four years.The company uses the double-declining-balance method.What is its book value at December 31,2010?

One difference between the double-declining-balance method and the straight-line method is that the double-declining-balance method:

The Widget Tool and Die Company buys a $400,000 stamping machine that has an estimated residual value of $20,000.The company expects the machine to produce two million units.It makes 400,000 units during the current period.If the units-of-production method is used,the amortization rate is:

If the double-declining balance method were used to amortize a building that has a 10-year useful life and a residual value equal to 10% of the building's original cost,what amortization rate would be used?

What is the adjusted balance in the Accumulated amortization account at the end of 2010?

Which of the following statements is true when the straight-line method is used to compute amortization?