Question
QUESTION 1 What effect does depreciation have on the calculation of the rate of return on total assets? affects both the numerator and denominator no
QUESTION 1
What effect does depreciation have on the calculation of the rate of return on total assets?
affects both the numerator and denominator | ||
no effect | ||
increases the outcome | ||
decreases the outcome |
QUESTION 2
Which one of the following statements is true?
The activity method of computing depreciation could result in zero depreciation expense in some periods of time. | ||
If the activity method is in use, residual value should not be subtracted from cost to determine the depreciation base. | ||
The activity method produces a constant total cost of depreciation each period. | ||
The activity method should be used when the service life of the asset is affected mostly by the passage of time. |
QUESTION 3
Many companies that use the declining-balance method of depreciation switch to the straight-line method at what point in the life of a depreciable asset?
never, as one method must be applied consistently throughout the life of an asset | ||
in the last quarter of the life of the asset | ||
when the accelerated depreciation exceeds the straight-line depreciation | ||
midpoint in the life of the asset |
QUESTION 4
The MACRS differs from straight-line depreciation computed for financial reporting. In this respect, which of the following isnot true?
The MACRS uses longer asset lives. | ||
The MACRS ignores residual value. | ||
The MACRS decreases the income taxes payable in the early years of an asset's life. | ||
The MACRS accelerates cost recovery. |
QUESTION 5
When low-cost depreciable assets with similar characteristics, service lives, and residual values are acquired, which depreciation method should be used?
composite depreciation | ||
impairment depreciation | ||
group depreciation | ||
such assets should not be depreciated |
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