Incidental expenditures incurred when purchasing equipment (like freight, installation, and brokerage fees) that are ordinary and necessary for the acquisition should be:

expensed as incurred    Incorrect or    included in an asset's costCorrect

 

In an apportionment of the amount paid to acquire a package of assets, the amount assigned to a specific asset is based on its relative appraised value. The approach described relates to a:

cash purchase    Incorrect or    lump-sum purchaseCorrect

 

Which party pays the other for the use of property?

lessee   Correct or    lessorIncorrect

 

Under which type of lease does the lessee obtain the rights to use leased property for a limited period of time and treat amounts paid as expense?

operating lease   Correct or    capital leaseIncorrect

 

The process used to allocate the cost of long-lived assets to the accounting periods benefited is known as:

obsolescence    Incorrect or    depreciationCorrect

 

Depreciation is a process of:

valuation   Incorrect or    allocationCorrect

 

The term "service life" is synonymous with:

physical life    Incorrect or    economic lifeCorrect

 

Business growth may cause certain items of depreciable property, plant, and equipment to become deficient in their service capabilities. Such action is termed:

physical deterioration   Incorrect or    inadequacyCorrect

 

Asset cost minus residual value is termed:

book value    Incorrect or    depreciable baseCorrect

 

Under the units-of-output depreciation method, the depreciable base is divided by the service life:

in years    Incorrect or    in outputCorrect

 

Under double-declining balance depreciation, salvage value is ignored in the preliminary depreciation calculation.

true   Correct or    falseIncorrect

 

The straight-line method generally results in the highest possible (as compared to accelerated depreciation methods) depreciation expense during an asset's early years of usage.

true   Incorrect or   falseCorrect

 

In addition to a change in estimated service life, what other type of change would likely result in a revision of depreciation amounts?

change in useful life   Correct or   change in accumulated depreciationIncorrect

 

The process to adjust depreciation for a change in service life entails spreading the remaining depreciable base over the remaining useful life.

true   Correct or    falseIncorrect

 

The Modified Accelerated Cost Recovery System is primarily used for:

tax purposes    Correct or    financial reporting purposesIncorrect

 

A company must utilize the same depreciation methods for financial reporting and taxes purposes.

true   Incorrect or   falseCorrectIncorrect