CHAP011 - Chapter 11 Operational Assets: Utilization and...

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Chapter 11 Operational Assets: Utilization and Impairment True/False Questions 1. The three factors in cost allocation of a depreciable asset are service life, the allocation base, and the allocation method. Answer: True Learning Objective: 1 Level of Learning: 1 2. The physical life of a depreciable asset sets the lower limit of its service life. Answer: False Learning Objective: 1 Level of Learning: 1 3. Any method of depreciation must be both systematic and rational. Answer: True Learning Objective: 1 Level of Learning: 1 4. 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 Learning Objective: 2 Level of Learning: 2 5. Total depreciation is the same over the life of an asset regardless of the method of depreciation used. Answer: True Learning Objective: 1 Level of Learning: 2 6. Activity-based methods of depreciation are appropriate for assets whose service life is a function of use rather than time. Answer: True Learning Objective: 2 Level of Learning: 1 7. Once selected for existing assets, a company must consistently use the same method of depreciation for all subsequent fixed asset acquisitions. Answer: False Learning Objective: 2 Level of Learning: 1 8. The use of group and composite depreciation methods is an example of the application of the cost effectiveness and materiality constraints. Answer: True Learning Objective: 2 Level of Learning: 1 9. A change in the estimated recoverable units used to compute depletion requires retroactive adjustments to the financial statements. Answer: False Learning Objective: 5 Level of Learning: 2 10. Statutory depletion is the maximum amount of depletion expense that may be reported in financial statements prepared according to GAAP. Answer: False Learning Objective: 3 Level of Learning: 1 Spiceland/Sepe/Tomassini, Intermediate Accounting, Fourth Edition 159
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Chapter 11 Operational Assets: Utilization and Impairment 11. One of the advantages of group and composite methods is that gains and losses on the disposal of individual assets need not be computed. Answer: True Learning Objective: 2 Level of Learning: 1 12. Changes in the estimates involved in depreciation, depletion, and amortization require retroactive restatement of financial statements. Answer: False Learning Objective: 5 Level of Learning: 1 Matching Pair Questions Use the following to answer questions 13-17: 13-17. Listed below are ten terms followed by a list of phrases that describe or characterize five of the terms. Match each phrase with the correct term placing the letter designating the best term in the space provided by the phrase. Terms:
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CHAP011 - Chapter 11 Operational Assets: Utilization and...

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