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91. The depreciation method that applies a constant percentage to depreciable cost in calculating depreciation is a. straight-line. b. units-of-activity. c. declining-balance. d. none of these.

Use the following information for questions 92–93.

On October 1, 2002, Ellis Company places a new asset into service. The cost of the asset is $20,000 with an estimated 5-year life and $5,000 salvage value at the end of its useful life.

92. What is the depreciation expense for 2002 if Ellis Company uses the straight-line method of depreciation? a. $750. b. $4,000. c. $1,000. d. $2,000.

93. What is the book value of the plant asset on the December 31, 2002, balance sheet assuming that Ellis Company uses the double-declining-balance method of depreciation? a. $13,000. b. $15,000. c. $18,000. d. $19,000.

94. Which depreciation method is most frequently used in businesses today? a. Straight-line b. Declining-balance c. Units-of-activity d. Double-declining-balance

95. Wine Company uses the units-of-activity method in computing depreciation. A new plant asset is purchased for $48,000 that will produce an estimated 100,000 units over its useful life. Estimated salvage value at the end of its useful life is $4,000. What is the depreciation cost per unit? a. $4.40. b. $4.80. c. $.44. d. $.48.

96. Units of activity is an appropriate depreciation method to use when a. it is impossible to determine the productivity of the asset. b. the asset's use will be constant over its useful life. c. the productivity of the asset varies significantly from one period to another. d. the company is a manufacturing company.

97. The calculation of depreciation using the declining balance method, a. ignores salvage value in determining the amount to which a constant rate is applied. b. multiplies a constant percentage times the previous year's depreciation expense. c. yields an increasing depreciation expense each period. d. multiplies a declining percentage times a constant book value.

Use the following information for questions 98–99.

Grey Company purchased a new van for floral deliveries on January 1, 2002. The van cost $24,000 with an estimated life of 5 years and $6,000 salvage value at the end of its useful life. The double-declining-balance method of depreciation will be used.

98. What is the depreciation expense for 2002? a. $4,800. b. $3,600. c. $7,200. d. $9,600. 99. What is the balance of the Accumulated Depreciation account at the end of 2003? a. $3,840. b. $11,520. c. $15,360. d. $5,760.

100. Porter Company purchased equipment for $180,000 on January 1, 2001, and will use the double-declining-balance method of depreciation. It is estimated that the equipment will have a 3-year life and an $8,000 salvage value at the end of its useful life. The amount of depreciation expense recognized in the year 2003 will be a. $20,000. b. $12,000. c. $21,776. d. $13,776.

101. A plant asset was purchased on January 1 for $50,000 with an estimated salvage value of $10,000 at the end of its useful life. The current year's Depreciation Expense is $5,000 calculated on the straight-line basis and the balance of the Accumulated Depreciation account at the end of the year is $25,000. The remaining useful life of the plant asset is a. 10 years. b. 8 years. c. 5 years. d. 3 years.

102. A change in the estimated useful life of equipment requires a. a retroactive change in the amount of periodic depreciation recognized in previous years. b. that no change be made in the periodic depreciation so that depreciation amounts are comparable over the life of the asset. c. that the amount of periodic depreciation be changed in the current year and in future years. d. that income for the current year be increased.

103. Hunt Company has decided to change the estimate of the useful life of an asset that has been in service for 2 years. Which of the following statements describes the proper way to revise a useful life estimate? a. Revisions in useful life are permitted if approved by the IRS. b. Retroactive changes must be made to correct previously recorded depreciation. c. Only future years will be affected by the revision. d. Both current and future years will be affected by the revision.

104. Ken's Copy Shop bought equipment for $48,000 on January 1, 2001. Ken estimated the useful life to be 3 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2002, Ken decides that the business will use the equipment for 5 years. What is the revised depreciation expense for 2002? a. $16,000. b. $6,400. c. $8,000. d. $12,000.

105. Expenditures that maintain the operating efficiency and expected productive life of a plant asset are generally a. expensed when incurred. b. capitalized as a part of the cost of the asset. c. debited to the Accumulated Depreciation account. d. not recorded until they become material in amount.

106. Which of the following is not true of ordinary repairs? a. They primarily benefit the current accounting period. b. They can be referred to as revenue expenditures. c. They maintain the expected productive life of the asset. d. They increase the productive capacity of the asset.

107. The paneling of the body of an open pick up truck would be classified as a. a revenue expenditure. b. an addition. c. an improvement. d. an ordinary repair.

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