The costs for environmental clean-up at the end of an asset’s useful life (under ASPE) Select one: a. include only costs related to the acquisition of the asset. b. are recognized only if they represent a legal obligation. c. are capitalized once they have become apparent. d. are always expensed as incurred.

The costs for environmental clean-up at the end of an asset’s useful life (under ASPE) Select one: a. include only costs related to the acquisition of the asset. b. are recognized only if they represent a legal obligation. c. are capitalized once they have become apparent. d. are always expensed as incurred.

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 4MC: Which of the following statements about capitalizing costs is correct? A. Capitalizing costs refers...

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Which of the following statements about capitalizing costs is correct? A. Capitalizing costs refers to the process of converting assets to expenses. B. Only the purchase price of the asset is capitalized. C. Capitalizing a cost means to record it as an asset. D. Capitalizing costs results in an immediate decrease in net income.
What is a relevant cost? Explain why depreciation on an existing asset is always irrelevant.
In which of the following situations would a cost incurred after an asset’s acquisition be capitalized? A.The useful life of the asset is increased. B.The amount of the expenditure must be immaterial. C.The expenditure is necessary to maintain the working order of the asset. D.There is no increase in the useful life of an asset.
What is the effective life of an asset? a. The total period of ownership of the asset, including when it is not installed and ready for use.. b. The period prior to the asset being abandoned or scrapped. c. The period that the asset can be used for income-producing purposes. d. All of the above.
3) Which of the following best describes a depreciation base?7) The acquisition cost of an asset relative to its fair value O The estimated market value of an asset at the end of its useful life O The historical cost of an asset less the depreciation recognized to date O The amount that should be expensed over an asset's useful life
What is the purpose of charging depreciation in financial statements? A To allocate the cost of a non-current asset over the accounting periods expected to benefit from its use B To ensure that funds are available for the eventual replacement of the asset C To reduce the cost of the asset in the statement of financial position to its estimated market value D To account for the ‘wearing-out’ of the asset over its life
TRUE OR FALSE The term used to describe the mechanical process of allocating the cost of an intangible asset to expense over the shorter of the legal life or estimated useful life is called amortization.
Which of the following statements if not true? a. Depreciation is the process of allocating the purchase price of an asset minues its residual value to expense, for each period benefited by the asset. b. The cost of an asset includes all acquisition costs necessary to obtain the benefits to be derived from the asset. c. The service life of an asset is the measure of the number of years of service expected from the asset before its disposal. d. The residual value of an asset is the difference between the expected book value of the asset at the end of its service and the cost of disposal.
Statement 1: If there is an indication of impairment, it means that the remaining useful life, the depreciation/amortization method or the residual value for the asset needs to be reviewed and adjusted, even if no impairment loss is recognized for the asset. Statement 2: Replacement costs are generally appropriate in measuring the recoverable amount of the asset because replacement cost not only measures the cost of an asset but also measure the future economic benefits recoverable from its use and/or disposal. O Only Statement 1 is correct. O Only Statement 2 is correct. Both statements are correct. Both statements are incorrect.
The factors used to compute depreciation expense are an asset's: O Cost, residual value, and service life. O Cost, residual value, and physical life. O Cost, replacement value, and service life. O Fair value, residual value, and economic life.
Depreciation expense under the invenroty system is a. Based on cost minus residual value b. Basically a FIFO approach to depreciable asset accounting c. The result of applying a depreciation rate to the original cost d. A measure of the change in the value of the depreciable asset
The depreciable amount is also called the _________________. Select one alternative: carrying amount depreciable asset historical amount depreciable base