1. Which of the following is not a reason for a subsequent asset expenditure cost to be capitalized:

a. The useful life of an asset is increased. b. The assets operating condition is maintained. c. The quality of assets produced is increased. d. The quantity of assets produced is increased.

2. Which of the following is not a capital expenditure?

a. Ordinary repairs b. Rearrangement c. Reinstallation d. Replacement

3. Which of the following most accurately reflects the concept of depreciation as used in accounting?

a. The process of charging the decline in value of an economic resource to income in the period in which the benefit occurred.

b. The process of allocating the cost of tangible assets to expense in a systematic and rational manner to those periods expected to benefit from the use of the asset.

c. A method of allocating asset cost to an expense account in a manner which closely matches the physical deterioration of the tangible asset involved.

d. An accounting concept that allocates the portion of an asset used up during the year to the contra asset account for the purpose of properly recording the fair market value of tangible assets.

Which of the following is not true regarding accelerated depreciation methods:

a. they are also referred to as decreasing-charge methods.

b. the same amount of depreciation expense is recognized each accounting period.

c. they are appropriate for assets whose usefulness is higher during the first years of ownership.

d. they result in more depreciation expense being recognized during the first years of ownership.