Intermediate Accounting J David Spiceland 10e Test Bank

Intermediate Accounting, 10e (Spiceland)

Chapter 11   Property, Plant, and Equipment and Intangible Assets:

                        Utilization and Disposition

1) The three factors in cost allocation of a depreciable asset are service life, allocation base, and allocation method.

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Measuring cost allocation

Learning Objective:  11-01 Explain the concept of cost allocation as it pertains to property, plant, and equipment and intangible assets.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA/Accessibility:  BB Critical Thinking; FN Measurement / Keyboard Navigation

2) The physical life of a depreciable asset is bounded by its service life.

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Measuring cost allocation

Learning Objective:  11-01 Explain the concept of cost allocation as it pertains to property, plant, and equipment and intangible assets.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA/Accessibility:  BB Critical Thinking; FN Measurement / Keyboard Navigation

3) An asset is depreciated over whichever is longer, the asset’s service life or physical life.

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Measuring cost allocation

Learning Objective:  11-01 Explain the concept of cost allocation as it pertains to property, plant, and equipment and intangible assets.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA/Accessibility:  Keyboard Navigation

4) An asset’s residual value is the amount the company expects to receive for the asset at the end of its service life, less any anticipated disposal costs.

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Measuring cost allocation

Learning Objective:  11-01 Explain the concept of cost allocation as it pertains to property, plant, and equipment and intangible assets.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA/Accessibility:  Keyboard Navigation

5) Any method of depreciation should be both systematic and rational.

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Measuring cost allocation

Learning Objective:  11-01 Explain the concept of cost allocation as it pertains to property, plant, and equipment and intangible assets.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA/Accessibility:  BB Critical Thinking; FN Measurement / Keyboard Navigation

6) Total depreciation is the same over the life of an asset regardless of the method of depreciation used.

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Measuring cost allocation

Learning Objective:  11-01 Explain the concept of cost allocation as it pertains to property, plant, and equipment and intangible assets.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA/Accessibility:  BB Critical Thinking; FN Measurement / Keyboard Navigation

7) Advocates of accelerated depreciation methods argue that their use tends to level out the total cost of ownership of an asset over its benefit period if one considers both depreciation and repair and maintenance costs.

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Depreciation—Basics and compare methods

Learning Objective:  11-02 Determine periodic depreciation using both time-based and activity-based methods and account for dispositions.

Bloom’s:  Understand

AACSB:  Reflective Thinking

AICPA/Accessibility:  BB Critical Thinking; FN Measurement / Keyboard Navigation

8) An asset’s book value is computed as its original cost minus residual value, less accumulated depreciation.

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Depreciation—Basics and compare methods

Learning Objective:  11-02 Determine periodic depreciation using both time-based and activity-based methods and account for dispositions.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA/Accessibility:  Keyboard Navigation

9) Activity-based methods of depreciation are appropriate for assets whose service life is a function of use rather than time.

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Depreciation—Basics and compare methods

Learning Objective:  11-02 Determine periodic depreciation using both time-based and activity-based methods and account for dispositions.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA/Accessibility:  BB Critical Thinking; FN Measurement / Keyboard Navigation

10) Once it selects a depreciation method for existing assets, a company must consistently use the same method of depreciation for all subsequent fixed asset acquisitions.

Answer:  FALSE

Difficulty: 1 Easy

Topic:  Depreciation—Basics and compare methods

Learning Objective:  11-02 Determine periodic depreciation using both time-based and activity-based methods and account for dispositions.

Bloom’s:  Remember

AACSB:  Reflective Thinking

AICPA/Accessibility:  BB Critical Thinking; FN Measurement / Keyboard Navigation