Intermediate Accounting Quiz

What is the primary purpose of depreciation?

• To allocate the cost of tangible assets to expense

• To determine market value

• To increase asset value

• To calculate profit

Which of the following is NOT a method of depreciation mentioned?

• Fixed-rate method

• Sum-of-the-years'-digits method

• Diminishing-balance method

• Straight-line method

What is the term for the expense related to intangible assets?

• Amortization expense

• Capital expense

• Depletion expense

• Depreciation expense

Which factor is NOT considered in the depreciation process?

• Method of cost apportionment

• Market value

• Asset's useful life

• Depreciable base

What does the declining-balance method of depreciation NOT consider?

• Salvage value

• Initial cost

• Depreciation rate

• Asset's useful life

What is the journal entry for recording depreciation expense?

• Accumulated Depreciation/Cash

• Equipment/Depreciation Expense

• Depreciation Expense/Accumulated Depreciation

• Cash/Equipment

What is component depreciation?

• Ignoring depreciation for certain assets

• Using a single depreciation rate for all assets

• Depreciating significant parts of an asset separately

• Depreciating the entire asset as one unit

How should companies handle revisions in depreciation rates?

• Only adjust the current period

• Account for changes in current and future periods

• Retrospectively adjust past financial statements

• Ignore the changes

What indicates that a long-lived asset is impaired?

• Inability to recover carrying amount

• Increase in market value

• Decrease in depreciation expense

• Increase in useful life

What is the journal entry to record an impairment loss?

• Loss on Impairment/Accumulated Depreciation

• Accumulated Depreciation/Loss on Impairment

• Loss on Impairment/Cash

• Cash/Loss on Impairment