1. What is the primary financial accounting purpose that underlies the recording of depreciation expense?

A) To record the decline in the asset's market value.

B) To record the asset's physical deterioration.

C) To assign a largely arbitrary amount of the asset's depreciable cost to depreciation expense just so the matching principle may be satisfied.

D) To assign an amount of the asset's cost to depreciation expense in the accounting periods benefiting from its use based on a logically defensible rationale so as to satisfy the matching principle.

E) None of the above.

2. A machine has a purchase price of $100,000 with an estimated salvage value of $10,000 and an estimated useful life of 10 years. What is the machine's book value at the end of three full years if the straight-line method is used?

A) $73,000

B) $90,000

C) $84,000

D) $67,000

E) None of the above

3. An asset has an estimated useful life of 5 years. What are the straight-line rate of depreciation and the double-declining balance rate of depreciation for this asset?

A) 5% and 10%.

B) 10% and 20%.

C) 20% and 50%.

D) 20% and 40%.

E) None of the above.

4. Which of the following should be charged to the Land account?

A) Fences and sidewalks.

B) The cost of purchasing and planting apple trees to be used as an income-producing orchard.

C) Cost of a sprinkler system.

D) Parking lot resurfacing.

E) Cost of assessments for public roadways, sewers, and sidewalks.

5. Which depreciation method or methods take the salvage value of the asset into consideration when computing the annual amount of depreciation expense?

A) Straight-line.

B) Units of Production.

C) Declining Balance.

D) A and C.

E) A and B.

Answer rating: 100% (QA)

1 D To assign an amount of the assets cost to depreciation ... View the full answer