1.Question :(TCO 4) In the first year of an asset’s life, which of the following methods has the largest depreciation?
Student Answer: Straight-line.
 Double-Declining balance.
 Sum-of-the-years’ digits.
 Composite or group.


 2.Question :(TCO 4) Amortization refers to the cost allocation for:
Student Answer: A patent.
 A building.
 A silver mine.


 3.Question :(TCO 4) The depreciable base for an asset is:
Student Answer: Its service life.
 The excess of its cost over residual value.
 The difference between its replacement value and cost.
 The amount allowable under MACRS.


 4.Question :(TCO 4) Cutter Enterprises purchased equipment for $72,000 on January 1, 2011. The equipment is expected to have a five-year life and a residual value of $6,000.
Using the straight-line method, depreciation for 2011 would be:
Student Answer: $13,200.
 None of the above is correct.



 5.Question :(TCO 4) A change in the estimated useful life and residual value of machinery in the current year is handled as:
Student Answer: A retrospective change back to the date of acquisition as though the current estimated life and residual value had been used all along.
 A prospective change from the current year through the remainder of its useful life, using the new estimates.
 A cumulative adjustment to income in the current year for the difference in depreciation under the new vs. old estimates.
 None of the above is correct.