Which of the following statements is the assumption on which straight line depreciation is based? Service value declines as a function of time rather than use Physical wear and tear are more important than economic obsolescence Service value declines as function of obsolescence rather than time The operating efficiency of the asset decrease in later years

Which of the following statements is the assumption on which straight line depreciation is based? Service value declines as a function of time rather than use Physical wear and tear are more important than economic obsolescence Service value declines as function of obsolescence rather than time The operating efficiency of the asset decrease in later years

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter7: Operating Assets

Section: Chapter Questions

Problem 12MCQ: Which of the following statements is true? a. The fixed asset turnover ratio assists managers in...

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Which of the following is true regarding special issues in accounting for long-term assets? A. An assets useful life can never be changed. B. An assets salvage value can never be changed. C. Depreciation expense calculations may need to be updated using new and more accurate estimates. D. Asset values are never reduced in value due to physical deterioration.
Which of the following statements is true? a. The fixed asset turnover ratio assists managers in determining the estimated future capital expenditures that are needed. b. The average age of the fixed assets is computed by dividing accumulated depreciation by depreciation expense. c. If net sales increases, the fixed asset turnover ratio will decrease. d. A relatively low fixed asset turnover ratio signals that a company is efficiently using its assets.
1. Which of the statements is incorrect concerning the depreciation methods? a) Under the output method, the cost per unit of production is constant. b) The straight-line method is particularly appropriate where the asset is expected to decline in usefulness as a function of time and the expected use pattern of the asset is fairly constant over time. c) The sum of the years' digits method provides for a decreasing depreciation charge. d) First-year depreciation under the double declining balance method is computed as the depreciable amount multiplied by double the straight-line rate. e) None of the choices is incorrect 2. All of the following statements are true, except: a) Property acquired in exchange for shares or other securities of the enterprise should be recorded at its fair value or the fair value of the securities, whichever is more clearly evident b) When property is acquired in exchange for another, its cost is usually determined by reference to the fair value of the asset…
Which of the following statements is true regarding depreciation methods?a. The use of a declining balance method of depreciation will produce lower depreciation charges in the early years of an asset’s life compared to the straight-line depreciation method.b. Over the life of an asset, a declining balance depreciation method will recognize more depreciation expense relative to the straight-line method.c. The use of a declining balance method instead of the straight-line method will produce higher book values for an asset in the early years of the asset’s life.d. The use of a higher estimated life and a higher residual value will lower the annual amount of depreciation expense recognized on the income statement
Question: Which method of depreciation results in a higher depreciation expense in the early years of an asset's life, making it more suitable for assets that rapidly lose their value? A) Straight-Line Depreciation B) Declining Balance Depreciation C) Units-of-Production Depreciation D) Sum-of-the-Years'-Digits Depreciation
What is the systematic periodic transfer of the cost of a fixed asset to an expense account during its expected useful life called (also thought of as the decline in usefulness of the fixed asset over time)? Group of answer choices fixing costing amortization depreciation
The depreciation method used shall reflect the pattern in which the asset’s future economic benefits areexpected to be consumed by the entity. Which statement is incorrect regarding depreciation methods?a. Straight-line depreciation results in a constant charge over the useful life if the asset’s residual value does not change.b. The diminishing balance method results in a decreasing charge over the useful lifec. The units of production method results in a charge based on the expected use or outputd. A depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is appropriate.
Which of the following statements about depreciation is not true? A. Depreciation does not mirror the actual loss of value over time. B. Depreciation is the allocation of the asset’s cost to expense over the expected years of use. C. If the fair value of the asset increases, depreciation is reversed to reflect the change in value. D. U.S. GAAP requires depreciation methods to be systematic and rational.
Which of the following statement best describes depreciation? a. It is a means of spreading the payment for non-current assets over a period of years b. It is a decline in the market value of assets c. It is a means of spreading the cost of non-current assets over the estimated useful life d. It is a means of estimating the amount of money needed to replace the assets
Which of the following is considered when depreciating an asset under the cost model? The cost of the asset. The change in the fair value of the asset. The useful life of the asset. Both a and b. Which of the following depreciation methods will most likely result in the highest amount of reported profit in the early years of an asset’s useful life? Straight line 150% declining balance Double declining balance Sum-of-the-years’ digits The most commonly used depreciation method is the straight-line method. replacement method. depreciation method based on revenue. inventory method.
Which statement regarding depreciation is incorrect? * Depreciation of noncurrent operating assets is an accounting process for the purpose of allocating asset costs over the periods benefited by use of the assets Service value declines as a function of time rather than use, is the assumption on which straight-line depreciation is based The composite depreciation method does not recognize gain or loss on the retirement of specific assets in the group. The double-declining-balance method ignores salvage value in calculating periodic depreciation expense. none of the above
Should depreciation continue to be recorded on a buildingwhen ample evidence exists that the current market value isgreater than original cost and that the rising trend of marketvalues is continuing? Explain.