11.The book value of plant assets
a.are the cost of the assets less accumulated depreciation
b.is an indicator of the market value of the assets
c.are the cost of assets less residual value
d.always less than market value
12.On January 1, 2007 a Medical Testing Laboratory acquired new blood processing equipment costing $400,000. The equipment has an estimated useful life of 10 years and an estimated residual value of $50,000. After making all necessary calculations and entries on December 31, 2008, what is the accumulated depreciation to date and book value of the equipment? (Assume the straight-line method is used.)
Accumulated Depreciation Book Value as of
as of December 31, 2008 December 31, 2008
a.$70,000 $330,000
b.$70,000 $280,000
c.$35,000 $365,000
d.$35,000 $315,000
13.Lincoln Company recorded $40,000 of depreciation as of December 31, 2007 on assets acquired that were purchased on January 1, 2007. The assets cost $200,000 and had an estimated useful life of 10 years. The method Lincoln used for depreciating the assets was
a.the straight-line method
b.an improper method
c.a method permitted only for tax purposes
d.an accelerated method
14.Accelerated depreciation
a.results in lower net income in earlier years and higher net income in later years
b.is used more often on the income statement than is the straight-line method
c.leads to higher book values for depreciable assets than does the straight-line method
d.allocates larger portions of cost to later periods than to earlier
15.Emergent Markets Corporation purchased a machine for $200,000 on January 1, 2007. The estimated life is 10 years. What is the book value on the December 31, 2009 balance sheet assuming straight-line depreciation is used and estimated residual value is zero?
a.$180,000
b.$160,000
c.$140,000
d.$ 60,000
16.Which of the following are included as part of the cost of plant assets?
a.amount paid for the asset only
b.the cost of site preparation and installation of the asset only
c.construction costs to make assets usable
d.all of the above are included as part of the cost of plant assets
17.Which of the following assets would NOT be depreciated?
a.a factory building
b.parking lot constructed for employees
c.land that was purchased for a future building site
d.equipment used to produce products
18.An expenditure that extends the life of an asset or enhances its value is a(n)
a.capital expenditure, recorded as an asset
b.operating expenditure, recorded as an expense
c.investing expenditure, recorded as an expense
d.capital expenditure, recorded as an expense
19.How is the depreciation process consistent with the matching principle?
a.the accumulated depreciation account is matched with the plant asset account on the balance sheet
b.the cost of consuming plant assets is matched with the periods that benefit from using the assets
c.the book value of the asset is matched with the current market value of the asset
d.the depreciation method used is matched with the expected productivity of the asset
20.Which of the following is NOT a good reason to use an accelerated depreciation method?
a.an asset may be more useful earlier in its life than later
b.using an accelerated method for tax purposes yields larger tax deductions in the early years
c.accelerated depreciation will result in lower pretax income, lower taxes and lower cash outflow
d.using an accelerated method will result in an asset more quickly reaching a book value equal to its residual value