Depreciable Assets and Depreciation

Question 1

What is the basic principle of matching revenue and expenses applied to?

Answer 1

Long-lived assets that are not held for sale in the ordinary course of business

Question 2

What are the 2 types of depreciation?

Answer 2

Physical and functional

Question 3

What is the type of depreciation related to an asset’s deterioration and wear over a period of time?

Answer 3

Physical depreciation

Question 4

What is the type of depreciation arising from obsolecence or inadequacy of the asset to perform efficiently?

Answer 4

Functional depreciation

Question 5

What is an estimate of the amount that will be realized at the end of the useful life of a depreciable asset?

Answer 5

Salvage value

Question 6

What is an advantage of component depreciation over composite depreciation?

Answer 6

Depreciation expense for the year would be more accurate because each component item would be depreciated over its useful life

Question 7

Is a gain or loss recognized when one asset in a group is retired?

Answer 7

No

Question 8

What is the formula for straight line depreciation?

Answer 8

(Cost - salvage value) / estimated useful life

Question 9

What is the formula for sum-of-the-years’-digits?

Answer 9

(Cost - salvage value) x (remaining life of asset/sum of the years digits)

Question 10

What is the formula for double-declining balance depreciation?

Answer 10

2 x(1/n) x (Cost - Acccumulated depreciation)

Question 11

What is the formula for units-of-production method?

Answer 11

Step 1: (Cost - Salvage value)/Estimated units or hours = Rate per unit or hour, Step 2: Rate per unit(or hour) x # of units produced(or hours worked) = depreciation expense

Question 12

What is the allocation of the cost of wasting natural resources?

Answer 12

Depletion