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74. The book value of an asset is equal to the a. asset's market value less its historical cost. b. blue book value relied on by secondary markets. c. replacement cost of the asset. d. asset's cost less accumulated depreciation.

75. Accountants do not attempt to measure the change in a plant asset's market value during ownership because a. the assets are not held for resale. b. plant assets cannot be sold. c. losses would have to be recognized. d. it is management's responsibility to determine fair values.

76. Depreciation is a process of a. asset devaluation. b. cost accumulation. c. cost allocation. d. asset valuation.

77. Recording depreciation each period is necessary in accordance with the a. going concern principle. b. cost principle. c. matching principle. d. asset valuation principle.

78. In computing depreciation, salvage value is a. the fair market value of a plant asset on the date of acquisition. b. subtracted from accumulated depreciation to determine the plant asset's depreciable cost. c. an estimate of a plant asset's value at the end of its useful life. d. ignored in all the depreciation methods.

79. When estimating the useful life of an asset, accountants do not consider a. the cost to replace the asset at the end of its useful life. b. obsolescence factors. c. expected repairs and maintenance. d. the intended use of the asset.

80. Equipment was purchased for $45,000. Freight charges amounted to $2,100 and there was a cost of $6,000 for building a foundation and installing the equipment. It is estimated that the equipment will have a $9,000 salvage value at the end of its 5-year useful life. Depreciation expense each year using the straight-line method will be a. $10,620. b. $8,820. c. $7,380. d. $7,200.

81. A truck was purchased for $60,000 and it was estimated to have a $12,000 salvage value at the end of its useful life. Monthly depreciation expense of $1,000 was recorded using the straight-line method. The annual depreciation rate is a. 20%. b. 2%. c. 8%. d. 25%.

82. A company purchased factory equipment on April 1, 2002 for $40,000. It is estimated that the equipment will have a $5,000 salvage value at the end of its 10-year useful life. Using the straight-line method of depreciation, the amount to be recorded as depreciation expense at December 31, 2002 is a. $4,000. b. $3,500. c. $2,625. d. $3,000.

83. A company purchased office equipment for $25,000 and estimated a salvage value of $5,000 at the end of its 5-year useful life. The constant percentage to be applied against book value each year if the double-declining-balance method is used is a. 20%. b. 25%. c. 40%. d. 4%.

84. The declining-balance method of depreciation produces a. a decreasing depreciation expense each period. b. an increasing depreciation expense each period. c. a declining percentage rate each period. d. a constant amount of depreciation expense each period.

85. A company purchased factory equipment for $100,000. It is estimated that the equipment will have a $10,000 salvage value at the end of its estimated 5-year useful life. If the company uses the double-declining-balance method of depreciation, the amount of annual depreciation recorded for the second year after purchase would be a. $40,000. b. $24,000. c. $36,000. d. $21,600.

86. A plant asset cost $48,000 and is estimated to have a $6,000 salvage value at the end of its 8-year useful life. The annual depreciation expense recorded for the third year using the double-declining-balance method would be a. $4,020. b. $6,750. c. $5,906. d. $4,595.

87. A factory machine was purchased for $40,000 on January 1, 2002. It was estimated that it would have an $8,000 salvage value at the end of its 5-year useful life. It was also estimated that the machine would be run 40,000 hours in the 5 years. If the actual number of machine hours ran in 2002 was 4,000 hours and the company uses the units-of-activity method of depreciation, the amount of depreciation expense for 2002 would be a. $4,000. b. $6,400. c. $8,000. d. $3,200.

88. The Modified Accelerated Cost Recovery System (MACRS) is a depreciation method which a. is used for tax purposes. b. must be used for financial statement purposes. c. is required by the SEC. d. expenses an asset over a single year because capital acquisitions must be expensed in the year purchased.

89. Which of the following methods of computing depreciation is production based? a. Straight-line b. Declining-balance c. Units-of-activity d. None of these

90. Management should select the depreciation method that a. is easiest to apply. b. best measures the plant asset's market value over its useful life. c. best measures the plant asset's contribution to revenue over its useful

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