1 A fixed asset is classified as a an a current asset b
1. A fixed asset is classified as a/an:
a. current asset.
b. non-current asset.
c. intangible asset.
d. contra-asset.
2. Which of the following is not a characteristic of a fixed asset?
a. Recorded at cost
b. Used for less than one year
c. Used in the normal course of operations
d. Not intended for resale
3. Which of the following would not be included in the cost of purchased equipment?
a. Taxes paid on the equipment
b. Shipping costs to have equipment delivered
c. Insurance premiums for the next month of use
d. Installation costs of equipment
4. Teel, Inc., bought a new forklift and incurred the following costs in association with the purchase:
At what value will the forklift be reported on Teel's balance sheet?
a. $28,650
b. $25,000
c. $27,100
d. $27,450
5. Which of the following is not an acceptable method of depreciation?
a. Total cost
b. Straight-line
c. Double-declining-balance
d. Units-of-activity
6. If Alcorn Industries purchases for $20,000 a new delivery truck with an estimated 5-year useful life and $2,500 salvage value, what is the depreciation expense for year one using the straight-line depreciation method?
a. $3,500
b. $4,000
c. $4,500
d. $5,000
7. Assume the same facts as the question above except that Alcorn Industries uses the double declining-balance method of depreciation. What would Alcorn Industries record as depreciation expense for year one?
a. $5,000
b. $6,000
c. $7,000
d. $8,000
8. Which of the following statements about depreciation is false?
a. Depreciation is necessary because of the matching principle
b. Depreciation expense is reported as a reduction to income on the income statement
c. All three methods of depreciation result in the same total depreciation over the life of an asset
d. All of the above statements are true
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