Intermediate Accounting 9th Edition By Spiceland – Test Bank
True/False Questions
- The three factors in cost allocation of a depreciable asset are service life, allocation base, and allocation method.
Answer: True
Level of Learning: 1 Easy
Learning Objective: 11-01
Topic Area: Measuring cost allocation
Blooms: Remember
AACSB: Reflective thinking
AICPA: BB Critical thinking AICPA: FN Measurement
- The physical life of a depreciable asset is bounded by its service life.
Answer: False
Level of Learning: 1 Easy
Learning Objective: 11-01
Topic Area: Measuring cost allocation
Blooms: Remember
AACSB: Reflective thinking
AICPA: BB Critical thinking AICPA: FN Measurement
- Any method of depreciation should be both systematic and rational.
Answer: True
Level of Learning: 1 Easy
Learning Objective: 11-01
Topic Area: Measuring cost allocation
Blooms: Remember
AACSB: Reflective thinking
AICPA: BB Critical thinking
AICPA: FN Measurement
- Total depreciation is the same over the life of an asset regardless of the method of depreciation used.
Answer: True
Level of Learning: 1 Easy
Learning Objective: 11-01
Topic Area: Measuring cost allocation
Blooms: Understand
AACSB: Reflective thinking
AICPA: BB Critical thinking
AICPA: FN Measurement
- 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
Level of Learning: 1 Easy
Learning Objective: 11-02
Topic Area: Depreciation
Blooms: Understand
AACSB: Reflective thinking
AICPA: BB Critical thinking
AICPA: FN Measurement
- Activity-based methods of depreciation are appropriate for assets whose service life is a function of use rather than time.
Answer: True
Level of Learning: 1 Easy
Learning Objective: 11-02
Topic Area: Depreciation
Blooms: Remember
AACSB: Reflective thinking
AICPA: BB Critical thinking
AICPA: FN Measurement
- Once selected for existing assets, a company must consistently use the same method of depreciation for all subsequent fixed asset acquisitions.
Answer: False
Level of Learning: 1 Easy
Learning Objective: 11-02
Topic Area: Depreciation
Blooms: Remember
AACSB: Reflective thinking
AICPA: BB Critical thinking
AICPA: FN Measurement
- Under group and composite depreciation methods, gains and losses on the disposal of individual assets need not be computed.
Answer: True
Level of Learning: 1 Easy
Learning Objective: 11-02
Topic Area: Depreciation – Group and composite methods
Blooms: Remember
AACSB: Reflective thinking
AICPA: BB Critical thinking
AICPA: FN Measurement
- Statutory depletion is the maximum amount of depletion that may be reported in financial statements prepared according to GAAP.
Answer: False
Level of Learning: 1 Easy
Learning Objective: 11-03
Topic Area: Depletion of natural resources
Blooms: Remember
AACSB: Reflective thinking
AICPA: BB Critical thinking
AICPA: FN Measurement
- A change in the estimated recoverable units used to compute depletion requires retroactive adjustments to the financial statements.
Answer: False
Level of Learning: 1 Easy
Learning Objective: 11-05
Topic Area: Changes in estimates
Blooms: Remember
AACSB: Reflective thinking
AICPA: BB Critical thinking
AICPA: FN Measurement
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