AFC Depreciation and Amortization

Question 1

Which depreciation method applies a constant rate to the declining book value of an asset each period?

Accepted Answer

Double-declining balance method

Answer

Straight-line method

Answer

Units of production method

Answer

Sum-of-years-digits method

Question 2

An asset costs $50,000, has a salvage value of $5,000, and a useful life of 5 years. What is the annual straight-line depreciation?

Accepted Answer

$9,000

Answer

$10,000

Answer

$11,000

Answer

$8,000

Question 3

Which term describes the systematic allocation of an intangible asset's cost over its useful life?

Accepted Answer

Amortization

Answer

Depreciation

Answer

Depletion

Answer

Impairment

Question 4

What is the book value of a depreciable asset?

Accepted Answer

Original cost minus accumulated depreciation

Answer

Replacement cost minus salvage value

Answer

Market value minus accumulated amortization

Answer

Original cost plus salvage value

Question 5

The units of production depreciation method bases the depreciation charge on:

Accepted Answer

Actual usage or output of the asset

Answer

Equal amounts each calendar year

Answer

A declining percentage of book value

Answer

The asset's market value

Question 6

What is salvage value in the context of depreciation?

Accepted Answer

The estimated residual value at the end of the asset's useful life

Answer

The initial purchase price of the asset

Answer

The market value of the asset during its productive life

Answer

The replacement cost of the asset when fully depreciated

Question 7

Which of the following is NOT a recognized depreciation method under GAAP?

Accepted Answer

Perpetual inventory

Answer

Straight-line

Answer

Double-declining balance

Answer

Sum-of-years-digits