AFC Depreciation and Amortization 3

Question 1

Which depreciation approach results in higher depreciation charges in the early years of an asset's useful life?

Accepted Answer

Accelerated depreciation method

Answer

Accelerated depreciation methods (such as double-declining balance and sum-of-years-digits) front-load depreciation, recording larger amounts in earlier years and smaller amounts later.

Question 2

How is the amortization of a patent typically recorded in the journal entry?

Accepted Answer

Debit Amortization Expense; Credit the intangible asset account

Answer

Amortization is recorded by debiting Amortization Expense and crediting the intangible asset account directly (or a related contra account), reducing the carrying value of the intangible.

Question 3

Which depreciation system is commonly required for federal income tax purposes in the United States?

Accepted Answer

Modified Accelerated Cost Recovery System (MACRS)

Answer

The IRS requires businesses to use MACRS for depreciating most business assets for federal tax purposes, which assigns assets to recovery-period classes with prescribed depreciation rates.

Question 4

On which financial statement does accumulated depreciation appear?

Accepted Answer

Balance sheet

Answer

Accumulated depreciation is a contra-asset account reported on the balance sheet, directly below the related asset's cost to show its net book value.

Question 5

An asset's depreciable cost is calculated as:

Accepted Answer

Original cost minus salvage value

Answer

Depreciable cost is the portion of an asset's cost that will be expensed over its useful life, calculated as original cost minus estimated salvage value.

AFC - Accounting Fundamentals Certification Practice Test

AFC - Accounting Fundamentals Certification Practice Test

AFC Depreciation and Amortization 3