CAT CAT Inventory & Asset Management 2

Question 1

Under US GAAP, what is the straight-line depreciation method?

Accepted Answer

Equal depreciation expense each year over the asset's useful life

Answer

Straight-line depreciation spreads the depreciable cost evenly across all years of the asset's estimated useful life.

Question 2

Which depreciation method produces higher depreciation expense in the early years of an asset's life?

Accepted Answer

Double-declining balance

Answer

Double-declining balance applies double the straight-line rate to the asset's declining book value, front-loading depreciation expense.

Question 3

What is the book value of a fixed asset?

Accepted Answer

Original cost minus accumulated depreciation

Answer

Book value (also called carrying value) equals the asset's historical cost reduced by all depreciation charged since acquisition.

Question 4

What journal entry is made when a company purchases equipment for cash?

Accepted Answer

Debit Equipment, Credit Cash

Answer

Buying equipment for cash increases a fixed asset (debit) and decreases cash (credit), following the basic asset exchange pattern.

Question 5

When a fully depreciated asset is sold for a gain, which account is credited for the proceeds?

Accepted Answer

Cash

Answer

The cash received from the sale is recorded as a debit to Cash; the gain is recognized in a separate Gain on Sale of Asset account.

(CAT) Certified Accounting Technician Practice Test