Question :
61. Some assets, such as a nuclear power plant, not readily : 1230694
61. 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 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.
62. 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
63. 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
64. 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
65. Estimating _____ presents the most difficult task in the depreciation and amortization calculation. A change in this estimate will change the depreciation and amortization amounts going forward.
A. disposal costs
B. salvage value
C. acquisition costs
D. service lives
E. ordinary wear and tear from use
66. The _____ method divides the acquisition cost of an asset (including the cost to dismantle and retire) less its estimated salvage value by the estimated service life to calculate depreciation or amortization.
A. straight-line
B. sum-of-the-years’-digits
C. double declining balance method
D. accelerated Depreciation
E. decelerated Depreciation
67. Alpha Corporation has a machine which costs $10,000, has an estimated salvage value of $400, and has an expected service life of five years. The straight-line (time) method annual depreciation is
A. $960.
B. $1,400.
C. $1,500.
D. $1,920.
E. $2,000.
68. Beta Corporation acquired a patent for $60,000 which has an expected service life of five years and zero salvage value. The annual amortization is
A. $5,000.
B. $6,000.
C. $12,000.
D. $24,000.
E. $30,000.
69. The method of depreciation for assets whose utilization is not uniform over time is the _____ method.
A. Accelerated
B. Decelerated
C. Straight-Line (Time)
D. Straight-Line (Use)
E. Sum-of-the-years’-digits
70. Charley Company owns a delivery truck that costs $108,000, has an estimated salvage value of $8,000, and will provide 200,000 miles of use before retirement. If the truck operates 24,000 miles in a given year, the straight-line (use) depreciation charge is
A. $6,000
B. $12,000
C. $12,960
D. $24,000
E. $0
