Question

QUESTION 1

Which depreciation method ignores residual value when computing the depreciable base of an asset?

		sum-of-the-years'-digits method
		double-declining-balance method
		composite method
		group method

QUESTION 2

Depreciation of an asset based on the number of hours of usage is a(n)

		time-based method
		accelerated method
		replacement method
		activity-based method

QUESTION 3

Which of the following is not a factor in computing depreciation for a period?

		method of cost allocation
		service life
		present value
		residual value

QUESTION 4

On January 1, 2014, Lefty, Inc. purchased a machine for $6,000. The estimated life and residual value were five years and $150, respectively. The machine will produce approximately 80,000 units over its life. In 2014 and 2015, the machine produced 10,000 and 15,000 units, respectively. In 2015, Lefty recorded $1,440 of depreciation expense. The depreciation method in use was the

		activity method
		sum-of-the-years'-digits method
		double-declining-balance method
		straight-line method

QUESTION 5

What type of cost allocation must a company use?

		systematic
		rational
		systematic and rational
		systematic, rational, and reliable

Answer 1

Answer 1.Double Declining method ignores residual value.Depreciation rate is applied to book value of asset (cost less accumulated depreciation) and ignores residual value.

Answer 2 Activity based method where depreciation is calculated on basis of no. of units produced or no, of hours of usage of the asset.

Answer 3. Present value is not a factor for calculating depreciation.

Depreciation amount calculated depends on the cost of the asset,its useful life (no of years), salvage or residual value and most the method of calculating depreciation (cost allocation) over the period of asset.

Amswer 4 Activity method - Where depreciation is calculated on basis of actual activity performed or units produced during a particular periodof time.

Formula- (Cost of asset-salvage value)*actual no.of units produced during the period/total estimated units over the period of time.

Answer 5.Systematic and Rational is the method of cost allocation which is used for allocating expenses or cost incurred