Depreciation is a process by which:

a. the difference between current market value and historical cost of plant and equipment is recorded.

b. the cost of plant and equipment is allocated to expense over its useful life.

c. replacement funds are accumulated for plant and equipment.

d. the decline in market value of plant and equipment is determined and recorded.

On the balance sheet, the cumulative amount of depreciation expense recognized to date on a fixed asset is called:

a. amortization expense.

b. depreciation expense.

c. accumulated depreciation.

d. accumulated amortization.

According to accounting standards, the costs of intangible assets with an indefinite life, such as goodwill, should:

a. be debited to an expense account entirely in the year in which acquired.

b. not be amortized, but should be reviewed annually for impairment.

c. be amortized over a reasonable period of time not to exceed 40 years.

d. be reported on the statement of retained earnings in the year in which it is acquired.

Equipment with a cost of $160,000, an estimated salvage value of $40,000, and an estimated life of 15 years was depreciated by the straight-line method for 4 years. Due to obsolescence, it was determined that the useful life should be shortened by 3 years and the salvage value changed to zero. The depreciation expense for the current and future years is:

a. $11,636.

b. $16,000.

c. $8,000.

d. $11,000.

Which of the following statements isfalse?

a. A purchases account is used only under the periodic inventory system.

b. The inventory account is updated only at the end of the accounting period under the periodic inventory system.

c. A cost of goods sold account is updated after each sale of merchandise under the periodic inventory system.

d. The inventory account is updated after every sale and after every merchandise purchase under the perpetual inventory system.