1. 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 2. Economic factors that shorten the service life of an asset include a. obsolescence. b. supersession. c. inadequacy. d. all of these. 3. The activity method of depreciation a. is a variable charge approach. b. assumes that depreciation is a function of the passage of time. c. conceptually associates cost in terms of input measures. d. all of these. 4. Myers Company acquired machinery on January 1, 2005 which it depreciated under the straight-line method with an estimated life of fifteen years and no salvage value. On January 1, 2010, Myers estimated that the remaining life of this machinery was six years with no salvage value. How should this change be accounted for by Myers? a. As a prior period adjustment b. As the cumulative effect of a change in accounting principle in 2010 c. By setting future annual depreciation equal to one-sixth of the book value on January 1,2010 d. By continuing to depreciate the machinery over the original fifteen year life 5. Of the following costs related to the development of natural resources, which one is not a part of depletion cost? a. Acquisition cost of the natural resource deposit b. Exploration costs c. Tangible equipment costs associated with machinery used to extract the natural resource d. Intangible development costs such as drilling costs, tunnels, and shafts