#1
Which of the following is considered a fixed asset?
Office supplies
Cash
Building
Accounts receivable
#2
What is depreciation?
The process of increasing the value of an asset
The process of reducing the value of an asset over its useful life
The process of maintaining the value of an asset
The process of recording asset purchases
#3
Which of the following is NOT a fixed asset?
Land
Patents
Inventory
Equipment
#4
What is the salvage value of an asset?
The value of an asset when it is disposed of
The value of an asset when it is first acquired
The cost of maintaining an asset
The estimated residual value of an asset at the end of its useful life
#5
Which depreciation method allocates an equal amount of depreciation expense each year of the asset's useful life?
Straight-line depreciation
Double-declining balance depreciation
Units of production depreciation
Sum-of-the-years'-digits depreciation
#6
Which of the following is NOT a factor in determining depreciation expense under the straight-line method?
Cost of the asset
Residual value
Useful life
Maintenance costs
#7
Which of the following is a contra account to accumulated depreciation?
Accumulated amortization
Accumulated impairment
Accumulated appreciation
Accumulated depletion
#8
What happens to book value when depreciation expense is recorded?
Increases
Decreases
Remains the same
Depends on the method used
#9
Which of the following methods of depreciation results in the highest depreciation expense in the first year?
Straight-line depreciation
Double-declining balance depreciation
Units of production depreciation
Sum-of-the-years'-digits depreciation
#10
How does accumulated depreciation affect the balance sheet?
Decreases assets and decreases liabilities
Increases assets and decreases liabilities
Decreases assets and increases liabilities
Increases assets and increases liabilities
#11
Which of the following is true about capitalizing versus expensing costs related to fixed assets?
Capitalizing costs increases expenses in the short term.
Expensing costs increases assets in the long term.
Capitalizing costs decreases assets in the short term.
Expensing costs decreases expenses in the long term.
#12
What is the main advantage of using the double-declining balance method of depreciation?
It results in the most accurate depreciation expense.
It provides a steady stream of depreciation expense over time.
It accelerates depreciation in the early years of an asset's life.
It eliminates the need to estimate an asset's useful life.
#13
What is the purpose of impairment testing for fixed assets?
To increase the carrying amount of assets
To identify fixed assets with the highest depreciation
To ensure that the carrying amount of assets is not overstated
To record additional depreciation expense
#14
Which of the following factors affects the choice of depreciation method?
The age of the asset
The asset's market value
The asset's purchase price
The asset's insurance value
#15
What is the formula for calculating depreciation expense using the straight-line method?
(Cost of the asset - Salvage value) / Useful life
(Cost of the asset / Useful life) * 2
(Cost of the asset - Salvage value) * 2
(Cost of the asset * Useful life) / Salvage value
#16
Under which method of depreciation does an asset's depreciation expense vary based on its usage?
Straight-line depreciation
Double-declining balance depreciation
Units of production depreciation
Sum-of-the-years'-digits depreciation
#17
Which of the following is NOT a reason for depreciating fixed assets?
To match expenses with revenues
To allocate the cost of the asset over its useful life
To adjust for inflation
To provide for the eventual replacement of the asset
#18
When using the sum-of-the-years'-digits method, which factor decreases each year?
Cost of the asset
Residual value
Useful life
Depreciation rate
#19
What is the double-declining balance method of depreciation based on?
Asset's useful life
Asset's book value
Asset's historical cost
Asset's market value
#20
Which of the following statements about accumulated depreciation is correct?
It represents the total amount of depreciation expense recorded to date.
It represents the total amount of depreciation expense expected to be recorded in the future.
It represents the total value of an asset's accumulated profits.
It represents the total value of an asset's accumulated sales revenue.
#21
What is the formula for calculating depreciation expense using the units of production method?
(Cost of the asset - Salvage value) / Useful life
(Cost of the asset / Total expected units of production) * Actual units produced
(Cost of the asset * Useful life) / Salvage value
(Cost of the asset / Salvage value) * Units produced
#22
Which of the following depreciation methods results in the lowest depreciation expense in the first year?
Straight-line depreciation
Double-declining balance depreciation
Units of production depreciation
Sum-of-the-years'-digits depreciation
#23
In which financial statement is accumulated depreciation reported?
Income statement
Balance sheet
Statement of cash flows
Statement of retained earnings
#24
Which of the following depreciation methods results in a decreasing annual depreciation expense over the asset's useful life?
Straight-line depreciation
Double-declining balance depreciation
Units of production depreciation
Sum-of-the-years'-digits depreciation
#25
What is the impact of a change in estimate of an asset's useful life on depreciation expense?
No impact
Increase depreciation expense
Decrease depreciation expense
Depends on the method used