- Which of the following principles best describes the conceptual rationale for the methods of matching depreciation expense with revenues?
Your answer:
Immediate recognition
Partial recognition
Associating cause and effect
Systematic and rational allocation
- The activity method of depreciation
Your answer:
is a variable charge approach.
assumes that depreciation is a function of the passage of time.
conceptually associates cost in terms of input measures.
all of these.
- Use of the double-declining balance method
Your answer:
results in a decreasing charge to depreciation expense.
means salvage value is not deducted in computing the depreciation base.
means the book value should not be reduced below salvage value.
all of these.
- For the composite method, the composite
Your answer:
rate is the total cost divided by the total annual depreciation.
life is the total cost divided by the total annual depreciation.
life is the total depreciable cost divided by the total annual depreciation.
rate is the total annual depreciation divided by the total depreciable cost.
- Depreciation is normally computed on the basis of the nearest
Your answer:
day and to the nearest cent.
full month and to the nearest dollar.
day and to the nearest dollar.
full month and to the nearest cent.
- Palm Company acquired machinery on January 1, 1993 which it depreciated under the straight-line method with an estimated life of fifteen years and no salvage value. On January 1, 1998, Palmer estimated that the remaining life of this machinery was six years with no salvage value. How should this change be accounted for by Palmer?
Your answer:
As a prior period adjustment.
As the cumulative effect of a change in accounting principle in 1998.
By setting future annual depreciation equal to one-sixth of the book value on January 1, 1998.
By continuing to depreciate the machinery over the original fifteen year life.
- If income tax effects are ignored, accelerated depreciation methods
Your answer:
increase funds provided by operations.
tend to decrease the fixed asset turnover ratio.
tend to offset the effect of steadily increasing repair and maintenance costs on the income statement.
provide funds for the earlier replacement of fixed assets.
- On July 1, 1998, Gonzalez Corporation purchased factory equipment for $150,000. Salvage value was estimated to be $4,000. The equipment will be depreciated over ten years using the double-decling balance method. Counting the year of acquisition as one-half year, Gonzalez should record depreciation expense for 1999 on this equipment of
Your answer:
$30,000
$27,000
$24,000
$26,280
- On January 3, 1997, Gomez Co. purchased machinery. The machinery has an estimated useful life of eight years and an estimated salvage value of $30,000. The depreciation applicable to this machinery was $65,000 for 1999, computed by the sum-of-the-years'-digits method. The acquisition cost of the machinery was
Your answer:
$468,000
$360,000
$420,000
$390,000
- The Topeka Resources Company acquired a tract of land containing an extractable natural resource. Topeka is required by its purchase contact to restore the land to a condition suitable for recreational use after it has extracted the natural resource. Geological surveys estimate that the recoverable reserves will be 2,000,000 tons, and that the land will have a value of $1,200,000 after restoration. Relevant cost information follows: LAND: $9,000,000; ESTIMATED RESTORATION COSTS: $1,800,000. If Topeka maintains no inventories of extracted material, what should be the charge to depreciation expense per ton of extracted material?
Your answer:
$3.90
$4.50
$4.80
$5.40