Multiple Choice Questions:

1. A specialized piece of equipment closely associated with a mine is most likely to be depreciated over a shorter than normal useful life because the

a) Equipment will be fully utilized.

b) Income tax laws require that a shorter life be used.

c) Equipment contains certain defects.

d) Mine is expected to be fully depleted in the shorter length of time.

2. Equipment is purchased for $120,000. It has a five-year useful life and a $20,000 residual value. Under the double-declining-balance method, what is the depreciation expense for year 3?

a) $17,280

b) $15,360

c) $14,400

d) $12,800

3. A contract limiting the rights of others to go into business in a specific industry or line of business for a specified period is called a

a) Non-compete covenant.

b) Patent.

c) Copyright.

d) Trademark.

4. Accelerated depreciation assumes all of the following except that

a) Asset benefit increases with each year of use.

b) The asset provides more benefit in the early years.

c) Obsolescence makes an asset less valuable in its later years.

d) Repair expense is less in the early years than in the later years