Question :
91. Which method of depreciation will result in the greatest depreciation : 1245647
91. Which method of depreciation will result in the greatest depreciation charge in the last year of the asset’s life?
A. 125% declining balance
B. straight-line
C. 150% declining balance
D. sum-of-the-years’ digits
E. double declining balance
92. Clayton Drug Company purchases a patent from its creator. Which of the following is/are true?
A. A patent has a legal life of up to 40 years.
B. Management’s expectations of technological change may lead to a higher economic life than the legal life.
C. Clayton should amortize the acquisition cost of the patent over its expected useful life, equal to the shorter of the economic life and the legal life.
D. Clayton should amortize the acquisition cost of the patent over its legal life.
E. Clayton should amortize the acquisition cost of the patent over its economic life.
93. When calculating the depreciation or amortization of long-lived assets management must
A. measure the depreciable or amortizable basis of the asset.
B. estimate its service (useful) life.
C. decide the pattern of expiration of asset cost over its service life.
D. all of the above
E. none of the above
94. The terms salvage value and residual value refer to the estimated proceeds on the disposition of an
A. asset, only.
B. asset less all removal costs, only.
C. asset less all removal and selling costs.
D. asset plus all removal and selling costs, only.
E. estimated proceeds on the disposition of an asset plus all selling costs, only.
95. Which of the following is/are not true?
A. For buildings, common practice assumes a zero salvage value on the assumption that the costs a firm will incur in tearing down the building will approximate the sales value of the scrap materials recovered.
B. Tangible assets, with the exception of buildings, may have substantial salvage value.
C. Intangible assets related to a contractual right, such as landing rights at an airport or franchise rights to sell a franchiser’s products, generally expire at a specific time and therefore have zero residual value.
D. Identifiable intangibles acquired in a business combination that are separable, such as customer lists or brand names, may have significant salvage values.
E. none of the above
96. Some assets, such as a nuclear power plant, are not readily salable at the end of their useful lives, and retiring them may impose substantial costs. Which of the following is/are true?
A. Firms must estimate the fair value of the dismantling costs and include that amount in the initial measurement of the asset.
B. Firms recognize a liability, referred to as an asset retirement obligation at the estimated fair value of the dismantling costs.
C. Firms compute depreciation based on the combined cost of the plant assets, including the fair value of the dismantling obligations.
D. all of the above
E. none of the above
97. Some assets, such as a space shuttle, are not readily salable at the end of their useful lives, and retiring them may impose substantial costs. Which of the following is true?
A. Firms recognize a liability, referred to as an asset retirement obligation at the present value of the estimated dismantling costs.
B. Firms recognize a liability, referred to as an asset retirement obligation at the estimated fair value of the dismantling costs.
C. Firms recognize a liability, referred to as an asset retirement obligation at the estimated future value of the dismantling costs.
D. Firms recognize a liability, referred to as an asset retirement obligation at the estimated liquidation value of the dismantling costs.
E. Firms do not recognize a liability because such costs are uncertain in nature and the firms can always file for bankruptcy to avoid the dismantling costs.
98. In calculating depreciation and amortization for tangible assets, physical factors that limit service lives include all of the following except:
A. ordinary wear and tear from use.
B. chemical action such as rust.
C. the effects of wind and rain.
D. changes in production processes.
E. none of the above.
99. In calculating depreciation and amortization for tangible assets, functional factors that limit service lives include:
A. ordinary wear and tear from use.
B. chemical action such as rust.
C. the effects of wind and rain.
D. obsolescence.
E. none of the above.
100. The term _____ value refer to the estimated proceeds on the disposition of an asset less all removal and selling costs.
A. salvage
B. present
C. future
D. end game
E. current
