8.3 Calculate and record the depreciation of plant assets
1) Depreciation is a process of valuation of an asset.
2) Depreciation is based upon cost, useful life, and salvage value.
3) A plant asset's useful life may be short due to obsolescence.
4) Book value is depreciable cost minus accumulated depreciation.
5) Basing depreciation on a base such as kilometres driven per year would be an example of double-declining balance depreciation.
6) DDB balance is an accelerated method of calculating depreciation where residual value is not part of the initial computation.
7) A company purchased a computer system on March 1, 2012. Its cost was $35,000 and it had an estimated residual value of $5,000. It was expected to have a useful life for four years. To the nearest dollar, the depreciation for 2012 using straight-line depreciation will be:
A) $8,750.
B) $7,500.
C) $6,250.
D) $5,625.
E) $6,500.
8) If an asset generates revenue evenly over time, the depreciation method best suited for this asset would be the:
A) double-declining balance method.
B) straight-line method.
C) units-of-production method.
D) expense method.
E) capitalization method.
9) If an asset produces more revenue in its early years, the depreciation method best suited for this asset would be the:
A) expense method.
B) units-of-production method.
C) double-declining balance method.
D) straight-line method.
E) capital cost allowance method.
10) The method often used for income tax purposes is the:
A) expense method.
B) units-of-production method.
C) capital cost allowance method.
D) straight-line method.
E) capitalization method.