ch 10 Flashcards
True or false? Depreciation is based on the decline in the fair market value of the asset.
False
True or false? Depreciation, depletion, and amortization all involve the allocation of the cost of a long lived asset to expense.
True
True or false? The first step in determining whether an impairment has occurred is to estimate the future net cash flows expected from the use of that asset and its eventual disposition.
True
True or false? Depreciation is a means of cost allocation, not a matter of valuation.
true
True or false? The three factors involved in the depreciation process are the depreciation base, the useful life, and the risk of obsolescence.
False
True or false? An accelerated depreciation method is appropriate when the asset’s economic usefulness is the same each year.
False
True or false? The asset turnover ratio is computed by dividing net sales by ending total assets
False
Which principle best describes the conceptual rationale for the methods of matching depreciation expense with revenues?
Systematic and rational allocation
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 the answers are correct.
D
The following is true of depreciation accounting:
A. It is not a matter of valuation
B. It is a part of the matching of revenues and expenses
C. It retains funds by reducing income taxes and dividends
D. All of the answers are correct.
D
Which of the following disclosures is not required in the financial statements regarding
depreciation?
A. Accumulated depreciation, either by major classes of depreciable assets or in total.
B. Details demonstrating how depreciation was calculated
C. Depreciation expense for the period
D. Balances of major classes of depreciable assets, by nature and function
Details demonstrating how depreciation was calculated
