CH11R-9 - 21 The following is true of depreciation...

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21. The following is true of depreciation accounting. d. All of these. 22. Which of the following principles best describes the conceptual rationale for the methods of matching depreciation expense with revenues? b. Systematic and rational allocation 23. Depreciation accounting c. retains funds. S 24. Which of the following most accurately reflects the concept of depreciation as used in accounting? b. The process of allocating the cost of tangible assets to expense in a systematic and rational manner to those periods expected to benefit from the use of the asset. 25.The major difference between the service life of an asset and its physical life is that a. service life refers to the time an asset will be used by a company and physical life refers to how long the asset will last. P 26. The term "depreciable cost," or "depreciable base," as it is used in accounting, refers to a. the total amount to be charged (debited) to expense over an asset's useful life. 27. Economic factors that shorten the service life of an asset include d. all of these. 28. The activity method of depreciation a. is a variable charge approach. 29. For income statement purposes, depreciation is a variable expense if the depreciation method used is a. units-of-production. 30. If an industrial firm uses the units-of-production method for computing depreciation on its only plant asset, factory machinery, the credit to accumulated depreciation from period to period during the life of the firm will . d. vary with production. 31. Use of the double-declining balance method d. all of these.
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32. Use of the sum-of-the-years'-digits method c. means the book value should not be reduced below salvage value. 33. A graph is set up with "yearly depreciation expense" on the vertical axis and "time" on the horizontal axis. Assuming linear relationships, how would the graphs for straight-line and sum-of-the-years'-digits depreciation, respectively, be drawn? c. Horizontally and sloping down to the right 34. A principal objection to the straight-line method of depreciation is that it b. ignores variations in the rate of asset use. 35. Each year a company has been investing an increasingly greater amount in machinery. Since there is a large number of small items with relatively similar useful lives, the company has been applying straight-line depreciation at a uniform rate to the machinery as a group. The ratio of this group's total accumulated depreciation to the total cost of the machinery has been steadily increasing and now stands at .75 to 1.00. The most likely explanation for this increasing ratio is the b. estimated average life of the machinery is less than the actual average useful life. 36. For the composite method, the composite d. life is the total depreciable cost divided by the total annual depreciation.
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