71. Responsibility for selection of the depreciation methods used in financial reporting rests with:
A. Company management.
B. The FASB.
C. The IRS.
D. The CPA firm that audits the company's financial statements.
72. With respect to depreciation policies, the principle of consistency means:
A. A company should use the same depreciation methods in its financial statements that it uses in its income tax returns.
B. A company should use the same depreciation methods as other companies in the same industry.
C. A company should use the same depreciation method from year to year for a given plant asset.
D. A company should use the same depreciation method in computing depreciation expense on all its assets.
73. The book value of plant assets (other than land):
A. Increases with the passage of time.
B. Decreases with the passage of time.
C. Remains the same with the passage of time.
D. May increase or decrease depending upon the economy.
74. The gain on the disposal of equipment is recognized when:
A. The book value of the equipment is greater than the value received.
B. The book value of the equipment is less than the value received.
C. A salvage value exists.
D. A gain should not be recognized on the disposal of an asset.
75. For financial reporting purposes, the gain or loss on the sale of a plant asset is determined by comparing the asset's:
A. Cost with its book value.
B. Sales price with its book value.
C. Tax basis with its book value.
D. Sales price with its tax basis.
76. The gain or loss on the disposal of a depreciable asset reported in financial statements often differs from that reported for income tax purposes. The principal reason for the difference is:
A. The cost of the asset is different for financial reporting and income tax purposes.
B. The sales price of the asset is different for financial reporting and income tax purposes.
C. Different depreciation methods have been used in financial statements and in income tax returns.
D. The company has made an error-the same amount of gain or loss should appear in the income tax return as in the financial statements.
77. When a company uses straight-line depreciation and the half-year convention, assets with a five-year life:
A. Will have the same depreciation expense in the first and last years.
B. Will be depreciated over six accounting years.
C. Book value will equal its salvage value at the end of its economic life.
D. All of the above statements are correct.
78. Which of the following assets is not subject to depreciation and whose usefulness does not decline over time?
A. Patents.
B. Copyrights.
C. Land.
D. Coal mine.
79. Intangible assets are assets used in business operations but which:
A. Lack physical substance.
B. Cannot be sold.
C. Have been depreciated below their estimated salvage values.
D. Cannot be specifically identified.
80. For the financial statements of publicly traded companies, MACRS:
A. Is recommended.
B. Is required.
C. Is optional.
D. Is not considered to be in conformity with GAAP.