2024-DEPRECIATION

The following is true of depreciation accounting.

• It is not a matter of valuation

• It is part of the matching of revenues and expenses.

  
  

• It retains funds by reducing income taxes and dividends.

  
  

• All of these.

  
  

Which of the following principles best describes the conceptual rationale for the methods of matching depreciation expense with revenues?

• Associating cause and effect

  
  

• Systematic and rational allocation

  
  

• Immediate recognition

  
  

• Partial recognition

  
  

Depreciation accounting

a. provides funds.

b. funds replacements.

c. retains funds.

d. all of these.

• provides funds.

• funds replacements.

• retains funds.

• all of these.

Which of the following most accurately reflects the concept of depreciation as used in accounting?

• a. The process of charging the decline in value of an economic resource to income in the period in which the benefit occurred.

• b. The process of allocating the cost of tangible assets to expense in a systematic and rational manner to those periods expected to benefit from the use of the asset.

• c. A method of allocating asset cost to an expense account in a manner which closely matches the physical deterioration of the tangible asset involved.

• d. An accounting concept that allocates the portion of an asset used up during the year to the contra asset account for the purpose of properly recording the fair market value of tangible assets.

The major difference between the service life of an asset and its physical life is that

• service life refers to the time an asset will be used by a company and physical life refers to how long the asset will last.

• physical life is the life of an asset without consideration of salvage value and service life requires the use of salvage value.

  
  

• physical life is always longer than service life.

  
  

• service life refers to the length of time an asset is of use to its original owner, while physical life refers to how long the asset will be used by all owners.

The term "depreciable cost," or "depreciable base," as it is used in accounting, refers to

• the total amount to be charged (debited) to expense over an asset's useful life.

  
  

• the cost of the asset less the related depreciation recorded to date.

  
  

• the estimated market value of the asset at the end of its useful life.

• the acquisition cost of the asset.

  
  

Use of the double-declining balance method

• a. results in a decreasing charge to depreciation expense.

• b. means salvage value is not deducted in computing the depreciation base.

• c. means the book value should not be reduced below salvage value.

• d. all of these.

Use of the sum-of-the-years'-digits method

• results in salvage value being ignored.

  
  

• means the denominator is the years remaining at the beginning of the year.

  
  

• means the book value should not be reduced below salvage value.

  
  

• d. all of these.

Which of the following disclosures is not required in the financial statements regarding depreciation?

• Accumulated depreciation, either by major classes of depreciable assets or in total.

  
  

• Details demonstrating how depreciation was calculated.

  
  

• Depreciation expense for the period.

• Balances of major classes of depreciable assets, by nature and function.

The book value of a plant asset is

• the fair market value of the asset at a balance sheet date.

• the asset's acquisition cost less the total related depreciation recorded to date.

• equal to the balance of the related accumulated depreciation account.

  
  

• the assessed value of the asset for property tax purposes.