7.2-22 Which of the following statements is FALSE? A) As an asset is used in operations accumulated depreciation increases. B) As an asset is used in operations the book value of the asset decreases. C) As an asset is used in operations the book value of the asset increases. D) An asset’s final book value is its residual value. 7.2-23 When computing depreciation for a plant asset which of the following must be estimated? A) Useful life and residual value B) Residual value and current market value C) Useful life and current market value D) Useful life current market value and residual value Copyright 2010 Pearson Education Inc. Publishing as Prentice Hall. 24 7.2-24 The expected cash value of a plant asset at the end of its useful life is known as: A) scrap value. B) salvage value. C) residual value. D) any of the above. 7.2-25 The depreciable cost of an asset using straight line depreciation is defined as: A) cost minus accumulated depreciation. B) cost minus salvage value. C) current sales value minus historical cost. D) cost minus annual maintenance expense. 7.2-26 The book value of an asset is defined as: A) cost minus accumulated depreciation. B) cost minus salvage value. C) current sales value minus historical cost. D) cost minus annual maintenance expense. Copyright 2010 Pearson Education Inc. Publishing as Prentice Hall. 25 7.2-27 For financial reporting purposes most companies use: A) straight-line depreciation. B) units-of-production depreciation. C) double-declining balance depreciation. D) modified accelerated cost recovery system of depreciation. 7.2-28 When compared to the other methods of depreciation the double-declining-balance method of depreciation gives depreciation expense that is: A) less in the earlier periods. B) more in the earlier periods. C) approximately the same in earlier periods as with other methods. D) an accelerated method; therefore companies cannot use this method. 7.2-29 At the end of an asset’s useful life the balance in Accumulated Depreciation will be the same as the: A) tax liability. B) book value. C) salvage value. D) total depreciation expense over its useful life. Copyright 2010 Pearson Education Inc. Publishing as Prentice Hall. 26 7.2-30 The depreciation method that does NOT use residual value in calculating depreciation expense until the last year is the: A) units-of-production method. B) straight-line method C) double-declining balance method. D) all of the above. 7.2-31 On January 2 2010 KJ Corporation acquired equipment for $260 000. The estimated life of the equipment is 5 years or 40 000 hours. The estimated residual value is $20 000. If KJ Corporation uses the units of production method of depreciation what will be the debit to Depreciation Expense for the year ended December 31 2011—assuming that during this period the asset was used 8 250 hours? A) $48 000 B) $49 500 C) $51 500 D) $53 625
