Intermediate Accounting David Spiceland James Sepe Mark Nelson 8 – test Bank

Chapter 11

Property, Plant, and Equipment and Intangible Assets: Utilization and Impairment

True / False Questions

1.	The three factors in cost allocation of a depreciable asset are service life, allocation base, and allocation method. True False

2.	The physical life of a depreciable asset is bounded by its service life. True False

3.	Any method of depreciation should be both systematic and rational. True False

4.	Total depreciation is the same over the life of an asset regardless of the method of depreciation used. True False

5.	Advocates of accelerated depreciation methods argue that their use tends to level out the total cost of ownership of an asset over its benefit period if one considers both depreciation and repair and maintenance costs. True False

6.	Activity-based methods of depreciation are appropriate for assets whose service life is a function of use rather than time. True False

7.	Once selected for existing assets, a company must consistently use the same method of depreciation for all subsequent fixed asset acquisitions. True False

8.	Under group and composite depreciation methods, gains and losses on the disposal of individual assets need not be computed. True False

9.	Statutory depletion is the maximum amount of depletion that may be reported in financial statements prepared according to GAAP. True False

10.	A change in the estimated recoverable units used to compute depletion requires retroactive adjustments to the financial statements. True False

11.	Changes in the estimates involved in depreciation, depletion, and amortization require retroactive restatement of financial statements. True False

12.	Property, plant, and equipment and finite-life intangible assets must be tested for impairment at least once a year. True False

Sale

1.	The three factors in cost allocation of a depreciable asset are service life, allocation base, and allocation method. True False

2.	The physical life of a depreciable asset is bounded by its service life. True False

3.	Any method of depreciation should be both systematic and rational. True False

4.	Total depreciation is the same over the life of an asset regardless of the method of depreciation used. True False

5.	Advocates of accelerated depreciation methods argue that their use tends to level out the total cost of ownership of an asset over its benefit period if one considers both depreciation and repair and maintenance costs. True False

6.	Activity-based methods of depreciation are appropriate for assets whose service life is a function of use rather than time. True False

7.	Once selected for existing assets, a company must consistently use the same method of depreciation for all subsequent fixed asset acquisitions. True False

8.	Under group and composite depreciation methods, gains and losses on the disposal of individual assets need not be computed. True False

9.	Statutory depletion is the maximum amount of depletion that may be reported in financial statements prepared according to GAAP. True False

10.	A change in the estimated recoverable units used to compute depletion requires retroactive adjustments to the financial statements. True False

11.	Changes in the estimates involved in depreciation, depletion, and amortization require retroactive restatement of financial statements. True False