The units-of production method

The units-of production method

The straight-line method is one of
the most widely used methods of computing depreciation for financial statement
purposes.

7.2-8 At the end of its useful life, an asset is
said to be fully depreciated.

7.2-9 The units-of production method depends
directly on the time the asset is used.

7.2-10 The three depreciation methods allocate different amounts
of depreciation to each period, but all result in the same total amount of
depreciation over the life of the asset.

7.2-11 Double -declining-balance depreciation computes total
depreciation by multiplying the asset’s book value by two times the
straight-line rate.


The process of allocating a plant
asset’s cost to expense over the period in which the asset is used is called:

A) amortization.

B) allocation.

C) depreciation.

D) disclosure.

7.2-13 Which accounting principle directs the
depreciation process?

A) Full
disclosure

B) Going
concern

C) Historical
cost

D) Matching

7.2-14 The length of service that a business expects to get from
an asset as expressed in years, units of output, miles or other measures is
the:

A) depreciable
cost.

B) estimated
useful life.

C) salvage
value.

D) accelerated
depreciation method.


The depreciation
process attempts to match the:

A. salvage
value of the asset and the future market value of the asset.

B. book value
and the current market value of the asset.

C. cost of
the asset and the cash required to replace the asset.

D. revenues
earned by the asset and the cost of the asset

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