A. Impairment exists when:

1. book value is equal to the fair value of the asset.
2. none of the answers are correct.
3. book value is more than the fair value of the asset.
4. book value is less than the fair value of the asset.

B. An asset that cost $20,000 was retired and sold for $6,000 cash. Accumulated depreciation on the asset was $14,000. The entry to record this retirement and sale calls for recognizing:

1. a loss of $14,000.
2. a gain of $6,000.
3. no gain or loss.
4. a gain of $7,000

C. If an item of equipment is retired and scrapped or sold, how should the retirement be accounted for?

1. the accumulated depreciation account is removed from the books.
2. the difference between the proceeds or sales price and net book value is recorded as a gain or loss.
3. all of the answers are correct.
4. the asset account is removed from the books.

D. An asset acquired on June 22, 20X1, cost $70,000, has an estimated useful life of five years, and has a net salvage value of $10,000. What is the amount of depreciation expense for 20X1 if the straight-line method is used?

1. $8,000
2. $12,000
3. $7,000
4. $6,000

E. Assuming a five-year life, a cost of $40,000, and an estimated net salvage value of $8,000, what would be the depreciation for the second year of the life of an asset if the double-declining-balance method is used?

1. $6,400
2. $16,000
3. $8,000
4. $9,600

F. When an asset is constructed and used by the business, the capitalized cost includes all the following except:

1. measurable indirect cost.
2. cost of labor to construct the asset.
3. permits and fees.
4. materials.

G. A company that discounts an interest-bearing note receivable:

1. always recognizes interest income when the note is discounted.
2. never recognizes interest income when the note is discounted.
3. recognizes interest income if the proceeds exceed the face value of the note discounted.
4. recognizes interest income only if the proceeds from discounting exceeds the maturity value of the note discounted.