Depreciable Assets and Depreciation

Question 1

When dealing with depreciation, pay close attention to:

Answer 1

dates

Question 2

Functional depreciation arises from

Answer 2

obsolence

Question 3

Physical depreciation is related to an asset’s:

Answer 3

wear and tear; deterioration

Question 4

Under IFRS, estimated useful life, salvage value, and the depreciation method used should be reviewed for appropriateness at each _____ _____ date

Answer 4

balance sheet

Question 5

Component depreciation is more:

Answer 5

accurate

Question 6

IFRS requires ________ depreciation

Answer 6

component

Question 7

Composite (______ assets) and group (_____ assets) is the process of _________ the economic lives of a number of property units and depreciating the entire class of assets over a single life

Answer 7

dissimilar; similar; averaging

Question 8

No gain or loss is recognized when one asset in the group is ________ or _____

Answer 8

retired; sold

Question 9

Straight line is used when service potential declines with _______

Answer 9

time

Question 10

Sum-of-the-years digits is an _________ method

Answer 10

accelerated

Question 11

Straight line calculation

Answer 11

(cost - SV) / estimated useful life

Question 12

Sum-of-the-years digits formula

Answer 12

(cost - SV) x (remaining life of asset / sum-of-the-years digits)

Question 13

Sum-of-the-years digits denominator calculation

Answer 13

n(n+1) / 2

Question 14

Double-declining balance is an ______ method for assets subject to _______ obsolescence

Answer 14

accelerated; rapid

Question 15

Double-declining balance formula

Answer 15

(2/N) x (cost - accumulated depreciation)

Question 16

Double-declining balance method ignores the _____ _____ but should not be depreciated blow the estimated _____ _____

Answer 16

salvage value

Question 17

Units-of-production is used when service potential declines with _____

Answer 17

use

Question 18

Units of production formula

Answer 18

step 1: (cost - SV) / estimated units or hours

step 2: rate per unit (oh hour) x # of units produced (or hours worked)

Question 19

Depreciation expense is taken only for the portion of the year that the asset is:

Answer 19

used

Question 20

JE for sale of asset during its useful life

Answer 20

DR: cash received from sale
DR: acc dep of sold asset
CR: sold asset at cost
CR/DR: gain/loss

Question 21

JE for write-off of fully depreciated asset

Answer 21

DR: acc dep
CR: old asset at full cost

Question 22

JE for total and permanent impairment of asset

Answer 22

DR: acc dep
DR: loss due to impairment
CR: asset at full cost

Question 23

Depletion is used for:

Answer 23

natural resources

Question 24

______ ______ cost includes any expenditures necessary to purchase and then prepare the land for the removal of resources, such as drilling costs or the costs for tunnels or shafts

Answer 24

purchase cost

Question 25

Residual value is similar to:

Answer 25

salvage value

Question 26

Depletion base =

Answer 26

cost - residual value

Question 27

Unit depletion formula

Answer 27

step 1: depletion base / estimated recoverable units

step 2: unit depletion x units extracted