CB CB Inventory and Fixed Assets 2

Question 1

The cost of a fixed (long-lived) asset includes all of the following EXCEPT:

Accepted Answer

Routine maintenance after acquisition

Answer

The capitalized cost of a fixed asset includes purchase price, taxes, freight, and installation, but ongoing maintenance is expensed as incurred.

Question 2

Straight-line depreciation allocates an asset's depreciable cost:

Accepted Answer

Equally over the useful life

Answer

Straight-line depreciation divides (Cost − Salvage Value) by useful life, producing the same depreciation expense each year.

Question 3

Under double-declining-balance (DDB) depreciation, the depreciation rate applied each year is:

Accepted Answer

Straight-line rate × 2

Answer

DDB doubles the straight-line rate (2 ÷ useful life) and applies it to the asset's declining book value each period.

Question 4

When a company spends money to extend an asset's useful life beyond the original estimate, the cost should be:

Accepted Answer

Capitalized and depreciated over the remaining useful life

Answer

Expenditures that extend useful life or increase capacity are capital improvements, added to the asset's book value and depreciated going forward.

Question 5

When a fully depreciated asset is sold for its salvage value, the journal entry includes:

Accepted Answer

A debit to Cash and a debit to Accumulated Depreciation, with a credit to the asset account

Answer

Selling a fully depreciated asset for salvage removes both the asset cost and its accumulated depreciation, with cash received matching the remaining book value.

(CB) Certified Bookkeeper Practice Test

(CB) Certified Bookkeeper Practice Test

CB CB Inventory and Fixed Assets 2