Depreciation Quiz - ing Coach 4k15o

7/31/2011

Depreciation Quiz | ingCoach.com

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Depreciation

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NOTE: For multiple-choice and true/false questions, simply place your cursor over what you think is the correct answer. (There is no need to click the answer.) For fill-in-the-blank questions place your cursor over the _________. If you have difficulty answering the following questions, learn more about this topic by reading our Depreciation Explanation.

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We also have Crosswords and Q&A for this topic.

1.

Financial Exams

Depreciation Expense shown on a company's income statement must be the same amount as the depreciation expense on the company's income tax return.

True

False

2.

The purpose of depreciation is to have the balance sheet report the current value of an asset.

True

False

3.

Depreciation Expense reflects an allocation of an asset's original cost rather than an allocation based on the economic value that is being consumed.

True

False

4.

An asset's useful life is the same as its physical life?

True

False

5.

One company might depreciate a new computer over three years while another company might depreciate the same model computer over five years...and both companies are right.

True

False

6.

Depreciation Expense is show n on the income statement in order to achieve ing's matching principle.

True

False

7.

Accumulated Depreciation will appear as a deduction within the section of the balance sheet labeled as Property, Plant and Equipment.

True

False

If a company continues to use equipment past the useful life that was assumed in determining the depreciation, there will be no Depreciation Expense in those additional years.

True

False

A company may depreciate equipment over 10 years on a straight-line basis for its financial statements, but might use an accelerated method of depreciation over a shorter time period on its income tax return?

True

False

10.

Depreciation Expense is sometimes referred to as a noncash expense.

True

False

11.

Both Land and Land Improvements w ill generally be depreciated.

True

False

12.

Amortization of intangible assets and depletion of natural resources is conceptually similar to depreciation of constructed assets.

True

False

Depreciation Expense shown on the financial statements is a precise amount that is continuously refined.

True

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Over the life of an asset subject to depreciation, the accelerated

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Depreciation Quiz | ingCoach.com Over the life of an asset subject to depreciation, the accelerated method will result in more Depreciation Expense in total than the total Depreciation Expense using the straight-line method.

True

False

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W hich of the following depreciation methods is NOT an accelerated method? Double-declining balance

16.

Straight-line

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Sum-of-the-years' digits

The book value of an asset is defined as

Cost minus Salvage Value Cost minus Accumulated Depreciation. Cost minus Salvage Value minus Accumulated Depreciation Estimated fair market value

17.

18.

19.

W hen a company purchases a 10-acre parcel of land and a building located on the land, the company will depreciate the entire cost over the useful life of the building.

True

False

The book value of an asset indicates the asset's fair market value at that time.

True

False

A company purchases equipment for $30,000 on July 1, 2010. It estimates that the equipment will have a salvage value of $2,000 and its useful life will be 7 years. Assuming that the company's ing year ends on December 31 of each year, w hat will be the Depreciation Expense for the years 2010 and 2011 assuming straightline depreciation? Y ear 2010: $__________

20.

Y ear 2011: $__________

On January 1, 2007 an asset was acquired for $30,000. Its useful life was expected to be 10 years and the salvage value is expected to be $0. After four years of use, the company realized the asset would be useful for only three more years. (In other w ords, the total useful life of the asset will be seven years instead of the original 10 years.) The company uses the straight-line method of depreciation. W hat will be the Depreciation Expense in each of the years 2011, 2012, and 2013? Answer

21.

If a company revises the estimated useful life of one of its assets being depreciated, the company w ill need to reissue its earlier financial statements as the earlier depreciation was incorrect.

True

False

About the Author: Harold Averkamp (A) has worked as an ant, consultant, and university ing instructor for more than 25 years. He is the author of the 2011 Master ing Package which has been praised for its ability to simplify ing in a way that anybody can understand.

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