WGU D104 Units 4-6 | Complete Practice Questions & Detailed Answers
A major exception exists when a company will pay a currently maturing obligation
from assets classified as long-term.
current liabilities are usually recorded their full maturity
and reported in financial statements at
their full maturity value
their full maturity
Group Method A depreciation method that depreciates a collection of
assets that are similar in nature
When do companies use the group When assets are similar and have relatively the same
method of depreciation? useful life
Composite approach A depreciation method that depreciations a collection
of assets that are heterogeneous and have different
lives
When do companies use the When assets and useful life are not similar
composite approach?
Composite depreciation rate depreciation per year/total cost of the assets
Can companies develop their own Yes
depreciation methods?
Depreciation The accounting process of allocating the cost of
intangible assets to expense for those periods
expected to benefit from the use of the assets
Depletion the accounting process of allocating the cost of
natural resources
, WGU D104 Units 4-6 | Complete Practice Questions & Detailed Answers
Amortization the accounting process of allocating the cost of
intangible assets
Salvage value the estimated amount a company will receive when it
sells the asset or removes it from service
Activity Method a function of use or productivity, instead of the
passage of time
Straight-line method period depreciation is the same throughout the
service life of the asset
Decreasing-charge methods provides a higher depreciation cost in the earlier
years and lower charges in later periods
Sum-Of-The-Years'-digits method results in decreasing depreciation charge based on a
decreasing fraction of depreciable cost (original cost
less salvage value)
Declining-balance method utilizes a depreciation rate (percentage) that is some
multiple of the straight-line method
Does the declining-balance method No
deduct salvage value?
What is the major difference between Service life refers to the time an asset will be used by
the service life of an asset and its a company, and physical life refers to how long the
physical life? asset will last.
The term "depreciable base," or The total amount to be charged to expense over an
"depreciation base," as it is used in asset's useful life
accounting, refers to which of the
following?
Which of the following is a principal It assumes that the asset's economic usefulness is
objection to the straight-line method of the same each year.
depreciation?
, WGU D104 Units 4-6 | Complete Practice Questions & Detailed Answers
Which of the following principles best Systematic and rational allocation
describes the conceptual rationale for
the methods of matching depreciation
expense with revenues?
Dixon Company purchased a $8,000
depreciable asset for $32,000. The
estimated salvage value is $4,000,
and the estimated useful life is 4
years. The double-declining balance
method will be used for depreciation.
What is the depreciation expense for
the second year on this asset?
How can the composite or group A straight-line rate is computed by dividing the total of
depreciation system be described? the annual depreciation expense for all assets in the
group by the total cost of the assets
When an asset being depreciated Recorded in the Accumulated Depreciation account
under the group method is disposed
of, how is any resulting gain or loss
recorded?
Cambodian Import Company $70,000
purchased a depreciable asset for
$160,000 on April 1, 2014. The
estimated salvage value is $40,000,
and the estimated useful life is 5
years. The straight-line method is
used for depreciation.
What is the balance in accumulated
depreciation on March 1, 2017 when
the asset is sold?
Unless otherwise stipulated, what is The nearest full month
depreciation normally computed on
the basis of?
, WGU D104 Units 4-6 | Complete Practice Questions & Detailed Answers
Chattanooga Company purchased a $17,333
depreciable asset for $80,000 on
January 1, 2015. The estimated
salvage value is $20,000, and the
estimated useful life is 5 years. The
straight-line method is used for
depreciation. On January 1, 2017, the
company made a capital expenditure
of $16,000 for an addition to the asset.
This capital expenditure improved the
overall efficiency of the asset during its
remaining useful life.
What is depreciation expense for
2017? (Assume that salvage value
remains unchanged.)
Does lower-of-cost-or-net realizable No
value for inventories apply to property,
plant, and equipment
Impairments when the carrying amount of an asset is not
recoverable and therefore a write-off is needed
Recoverability test a screening device to determine whether an
impairment has occurred
Impairment loss the amount by which the carrying amount of the
assets exceeds its fair value
Journal entry for loss on impairment Dr Loss on Impairment
Cr Accumulated Depreciation- Asset
Assets held for disposal are like Lower-of-cost-or- net realizable value
inventory and should be reported at
what value?
A major exception exists when a company will pay a currently maturing obligation
from assets classified as long-term.
current liabilities are usually recorded their full maturity
and reported in financial statements at
their full maturity value
their full maturity
Group Method A depreciation method that depreciates a collection of
assets that are similar in nature
When do companies use the group When assets are similar and have relatively the same
method of depreciation? useful life
Composite approach A depreciation method that depreciations a collection
of assets that are heterogeneous and have different
lives
When do companies use the When assets and useful life are not similar
composite approach?
Composite depreciation rate depreciation per year/total cost of the assets
Can companies develop their own Yes
depreciation methods?
Depreciation The accounting process of allocating the cost of
intangible assets to expense for those periods
expected to benefit from the use of the assets
Depletion the accounting process of allocating the cost of
natural resources
, WGU D104 Units 4-6 | Complete Practice Questions & Detailed Answers
Amortization the accounting process of allocating the cost of
intangible assets
Salvage value the estimated amount a company will receive when it
sells the asset or removes it from service
Activity Method a function of use or productivity, instead of the
passage of time
Straight-line method period depreciation is the same throughout the
service life of the asset
Decreasing-charge methods provides a higher depreciation cost in the earlier
years and lower charges in later periods
Sum-Of-The-Years'-digits method results in decreasing depreciation charge based on a
decreasing fraction of depreciable cost (original cost
less salvage value)
Declining-balance method utilizes a depreciation rate (percentage) that is some
multiple of the straight-line method
Does the declining-balance method No
deduct salvage value?
What is the major difference between Service life refers to the time an asset will be used by
the service life of an asset and its a company, and physical life refers to how long the
physical life? asset will last.
The term "depreciable base," or The total amount to be charged to expense over an
"depreciation base," as it is used in asset's useful life
accounting, refers to which of the
following?
Which of the following is a principal It assumes that the asset's economic usefulness is
objection to the straight-line method of the same each year.
depreciation?
, WGU D104 Units 4-6 | Complete Practice Questions & Detailed Answers
Which of the following principles best Systematic and rational allocation
describes the conceptual rationale for
the methods of matching depreciation
expense with revenues?
Dixon Company purchased a $8,000
depreciable asset for $32,000. The
estimated salvage value is $4,000,
and the estimated useful life is 4
years. The double-declining balance
method will be used for depreciation.
What is the depreciation expense for
the second year on this asset?
How can the composite or group A straight-line rate is computed by dividing the total of
depreciation system be described? the annual depreciation expense for all assets in the
group by the total cost of the assets
When an asset being depreciated Recorded in the Accumulated Depreciation account
under the group method is disposed
of, how is any resulting gain or loss
recorded?
Cambodian Import Company $70,000
purchased a depreciable asset for
$160,000 on April 1, 2014. The
estimated salvage value is $40,000,
and the estimated useful life is 5
years. The straight-line method is
used for depreciation.
What is the balance in accumulated
depreciation on March 1, 2017 when
the asset is sold?
Unless otherwise stipulated, what is The nearest full month
depreciation normally computed on
the basis of?
, WGU D104 Units 4-6 | Complete Practice Questions & Detailed Answers
Chattanooga Company purchased a $17,333
depreciable asset for $80,000 on
January 1, 2015. The estimated
salvage value is $20,000, and the
estimated useful life is 5 years. The
straight-line method is used for
depreciation. On January 1, 2017, the
company made a capital expenditure
of $16,000 for an addition to the asset.
This capital expenditure improved the
overall efficiency of the asset during its
remaining useful life.
What is depreciation expense for
2017? (Assume that salvage value
remains unchanged.)
Does lower-of-cost-or-net realizable No
value for inventories apply to property,
plant, and equipment
Impairments when the carrying amount of an asset is not
recoverable and therefore a write-off is needed
Recoverability test a screening device to determine whether an
impairment has occurred
Impairment loss the amount by which the carrying amount of the
assets exceeds its fair value
Journal entry for loss on impairment Dr Loss on Impairment
Cr Accumulated Depreciation- Asset
Assets held for disposal are like Lower-of-cost-or- net realizable value
inventory and should be reported at
what value?
