Accounting What The Numbers Mean Marshall 10th Edition Test Bank

Accounting What the Numbers Mean Marshall 10th Edition Test Bank
Accounting What the Numbers Mean Marshall 10th

Edition Test Bank
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Chapter 06
Accounting for and Presentation of Property, Plant, and Equipment, and

Other Noncurrent Assets
Multiple Choice Questions
1. When a firm buys land on which there is a building, and the building is torn down so that an
appropriate new building can be constructed on the land:
A. any of the purchase cost allocated to the old building is reported as a loss.
B. the cost assigned to the land excludes the cost of the old building.
C. the total cost of the land and old building are capitalized as land cost.
D. any of the purchase cost allocated to the old building is capitalized as part of the cost of the
new building.
2. Expenditures capitalized as long-lived assets generally include those expenditures that:
A. are made for normal repairs to maintain the usefulness of the asset over a number of years.
B. are for items that have a physical life of more than a year, regardless of their cost.
C. are material in amount and that have an economic benefit to the entity only in the current year.
D. are material in amount and that have an economic benefit to the entity that extends beyond the
current year.
3. Which of the following accounting concepts/principles is most significant in the development of a

capitalization policy?
A. Matching of revenue and expense.

B. Materiality.
C. Original Cost.
D. Consistency.
6-1
© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution
in any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.
4. Which of the following statements best describes the process of accounting for depreciation?
A. A process that attempts to recognize loss in economic value over a period of time.
B. A process for setting aside cash so funds will be available to replace the asset.
C. A process for recognizing the cost of an asset that should be matched against revenue earned
as a result of using the asset.
D. A process for recognizing all of the cost associated with using an asset in a revenue
generating activity.
5. The entry to record depreciation expense:
A. increases a contra asset and decreases net income.

B. decreases a contra asset and decreases net income.
C. decreases working capital and decreases net income.
D. decreases an asset and increases a contra asset.
6. The net book value of a depreciable asset is:
A. the fair value of the asset.

B. the amount for which the asset should be insured.
C. the difference between the asset's cost and accumulated depreciation.
D. the difference between the asset's cost and depreciation expense.
7. It is not unusual for a company to use different depreciation methods for book and tax purposes.
When this happens, the firm usually:
A. uses an accelerated depreciation method for book purposes.

B. uses an accelerated depreciation method for tax purposes.
C. is trying to maximize its taxable income.
D. is trying to minimize its book income.
8. The present value concept is widely applied in business because:
A. inflation erodes the purchasing power of money.

B. money has value over time.
C. accounting for operating leases requires its use.
D. most obligations are settled within a year.
6-2
9. When an accelerated depreciation method is used to calculate depreciation expense:
A. the net book value of the asset halfway through its useful life will be less than if straight-line
depreciation is used.
B. the net book value of the asset at the end of its useful life will be less than if straight-line
C. depreciation expense will be less in the early years of the asset's life than if straight-line
D. the accumulated depreciation account balance will increase by a larger amount in the last half
of an asset's life than if straight-line depreciation is used.
10. Moped, Inc. purchased machinery at a cost of $22,000 on January 1, 2014. The expected useful
life is 5 years and the asset is expected to have salvage value of $2,000. Moped depreciates its
assets using the double-declining balance method.
What is the firm's depreciation expense for the year ended December 31, 2014?
A. $2,000
B. $4,400
C. $6,000
D. $8,800
What is the accumulated depreciation for this asset on December 31, 2015?
A. $4,400
B. $5,280
C. $8,800
D. $14,080
6-3
What is the firm's gain or loss if the machinery is sold for $11,000 on December 31, 2015?
A. Gain of $4,000
B. Gain of $3,080
C. Loss of $600
D. Loss of $4,000
13. When a machine having a net book value of $5,000 is sold for $4,000:
A. current assets decrease, equipment (net) increases, and net income increases.
B. current assets increase, equipment (net) decreases, and net income increases.
C. current assets increase, equipment (net) decreases, and net income decreases.
D. current assets increase, equipment (net) increases, and net income decreases.
14. If there is a loss on the disposal of a depreciable asset:
A. no cash was received in the disposal transaction.

B. the net book value of the asset was negative.
C. in retrospect, the life over which the asset was depreciated was too short.
D. in retrospect, the depreciation expense recognized over the asset's life was too low.
6-4
15. Which of the following could be a correct journal entry to record the disposition of equipment?
A. Option A
B. Option B
C. Option C
D. Option D
16. The Modified Accelerated Cost Recovery System (MACRS) specifies which of the following
depreciation methods for buildings?
A. 150% declining-balance.
B. Double-declining-balance.
C. Straight line.
D. Buildings are not depreciable assets.
depreciation methods for land?
C. Straight line.
D. Land is not a depreciable asset.
6-5
18. If an organization has an obligation to pay $5,000 to a supplier two years from now, the present
value of the obligation:
A. is less than $5,000.

B. is $5,000.
C. is more than $5,000.
D. could be calculated using an annuity factor from the present value tables.
19. Depreciation, in accounting, is a process that results in:
A. depreciable assets being reported in the balance sheet at their fair value.
B. accumulating cash for the replacement of the asset.
C. an accurate measurement of the economic usefulness of an asset.
D. spreading the cost of an asset over its useful life to the entity.
20.
The present value of $3,000 to be received in 7 years at 10% is:
A. $616.22.
B. $1,539.60.
C. $3,000.00.
D. $5,845.67.
21.
The present value of $3,000 to be received every year for 9 years, at 10%, is:
A. $7,073.80.
B. $12,273.00.
C. $17,277.00.
D. $27,000.00.
6-6
22.
The present value of an obligation of $4,000 payable in 7 years at 8% is:
A. $1,760.
B. $2,334.
C. $3,206.
D. $3,680.
23.
A particular common stock has an annual cash dividend of $2.00 per share and is predicted to
have a market value of $30 per share 5 years from now. Assuming a discount rate of 10%, a fair
market price for the stock today is:
A. $20.00.
B. $26.21.
C. $37.58.
D. $56.21.
6-7
24.
Psyche Company wants to acquire Trim Company. Trim's ROI has been above average for its
industry; net income has averaged $70,000 a year more than the industry average. These
"excess" earnings are expected to continue at this amount for 5 years. Assuming a discount rate
of 8%, how much goodwill will arise from Psyches' purchase of Trim?
A. $40,836
B. $88,157
C. $279,489
D. $350,000
25. Leasehold is an example of which of the following types of assets?
A. Current asset.
B. Property, plant and equipment.
C. Goodwill.
D. Intangible asset.
26. The principal challenge to calculating depletion is estimating:
A. the cost of the asset.

B. the salvage value of the exploration equipment.
C. the demand for the product.
D. the quantity of material to be recovered.
27. Noncurrent, intangible assets such as leasehold improvements, patents, and copyrights are all
subject to:
A. depreciation.
B. amortization.
C. depletion.
D. consolidation.
6-8
28. When a depreciable asset is sold:
A. a gain arises if the sales proceeds exceed the net book value.
B. a loss arises if the sales proceeds exceed the net book value.
C. any cash received results in a gain.
D. depreciation expense is adjusted so there is no gain or loss.
29. Goodwill is an asset that arises because the present value of an acquired company's estimated
future earnings, discounted at the acquiring firm's ROI:
A. is less than the fair value of the net assets of the acquired company.
B. is more than the fair value of the net assets of the acquired company.
C. is more than the fair value of the net assets of the acquiring company.
D. is less than the fair value of the net assets of the acquiring company.
30. The intangible asset goodwill:
A. represents the management team's assessment of its value to the company.

B. may arise when one company purchases another company.
C. arises because the fair value of a company's assets is greater than cost.
D. all of these are correct.
31. Accounting for natural resources:
A. involves using the accumulated depreciation account.

B. involves estimating the quantity of the natural resource to be recovered.
C. involves an exception to the matching concept.
D. involves a sum-of-the-year's-digits depletion calculation.
32. Which of the following is not a term that describes part of the accounting for noncurrent assets?
A. Accumulation.
B. Depletion.
C. Amortization.
D. Depreciation.
6-9
33. Many companies use accelerated depreciation for tax purposes because:
A. it is easier to calculate than straight-line depreciation.

B. it reflects the amount of cash used in depreciation.
C. it results in lower taxable income than straight-line depreciation.
D. it is used for determining net income reported to stockholders.
Essay Questions
34. Lone Star Sales & Service acquired a new machine that cost $42,000 in early 2013. The machine
is expected to have a five-year useful life and is estimated to have a salvage value of $7,000 at
the end of its life. (Round your final answers to the nearest dollar.)
(a.) Using the straight-line depreciation method, calculate the depreciation expense to be
recognized in the second year of the machine's life and calculate the accumulated depreciation
after the third year of the machine's life.
(b.) Using the double-declining-balance depreciation method, calculate the depreciation expense
for the third year of the machine's life and the net book value of the machine at this point in time.
6-10
35. Goodwill results from the purchase of one firm by another for a price that is greater than the fair
value of the net assets acquired. On January 1, 2014, Blue Grass Co. purchased Red Grass Co.
for $1,200,000 when the net assets were valued at $1,000,000. Goodwill will be tested annually
for impairment. Assume that after the first year there was an impairment of $15,000.
Required:
(a.) Compute the value of goodwill to be recorded on the books of Blue Grass Company upon the
purchase of the business.
(b.) What is impairment and how is the first year's impairment recorded in the books?
6-11
Chapter 06 Accounting for and Presentation of Property, Plant, and
Equipment, and Other Noncurrent Assets Answer Key
Multiple Choice Questions
1. When a firm buys land on which there is a building, and the building is torn down so that an
appropriate new building can be constructed on the land:
A. any of the purchase cost allocated to the old building is reported as a loss.
B. the cost assigned to the land excludes the cost of the old building.
C. the total cost of the land and old building are capitalized as land cost.
D. any of the purchase cost allocated to the old building is capitalized as part of the cost of the
new building.
AACSB: Analytic
AICPA BB: Critical Thinking
AICPA FN: Reporting
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-01 Explain how the cost of land; buildings; and equipment is reported on the balance sheet.
2. Expenditures capitalized as long-lived assets generally include those expenditures that:
A. are made for normal repairs to maintain the usefulness of the asset over a number of
years.
B. are for items that have a physical life of more than a year, regardless of their cost.
C. are material in amount and that have an economic benefit to the entity only in the current
year.
D. are material in amount and that have an economic benefit to the entity that extends beyond
the current year.
AACSB: Analytic
AICPA FN: Reporting
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 06-02 Discuss how the terms capitalize and expense are used with respect to property; plant; and
equipment.
6-12
3. Which of the following accounting concepts/principles is most significant in the development of
a capitalization policy?
A. Matching of revenue and expense.

B. Materiality.
C. Original Cost.
D. Consistency.
AACSB: Analytic
AICPA FN: Decision Making
Blooms: Understand
Learning Objective: 06-02 Discuss how the terms capitalize and expense are used with respect to property; plant; and
equipment.
4. Which of the following statements best describes the process of accounting for depreciation?
A. A process that attempts to recognize loss in economic value over a period of time.
B. A process for setting aside cash so funds will be available to replace the asset.
C. A process for recognizing the cost of an asset that should be matched against revenue
earned as a result of using the asset.
D. A process for recognizing all of the cost associated with using an asset in a revenue
generating activity.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-03 Describe alternative methods of calculating depreciation for financial accounting purposes and
compare the relative effects of each on the income statement and the balance sheet.
5. The entry to record depreciation expense:
A. increases a contra asset and decreases net income.

B. decreases a contra asset and decreases net income.
C. decreases working capital and decreases net income.
D. decreases an asset and increases a contra asset.
AACSB: Analytic
AICPA FN: Reporting
Blooms: Understand
6-13
6. The net book value of a depreciable asset is:
A. the fair value of the asset.

B. the amount for which the asset should be insured.
C. the difference between the asset's cost and accumulated depreciation.
D. the difference between the asset's cost and depreciation expense.
AACSB: Analytic
AICPA FN: Reporting
Blooms: Remember
Difficulty: 1 Easy
7. It is not unusual for a company to use different depreciation methods for book and tax
purposes. When this happens, the firm usually:
A. uses an accelerated depreciation method for book purposes.

B. uses an accelerated depreciation method for tax purposes.
C. is trying to maximize its taxable income.
D. is trying to minimize its book income.
AACSB: Analytic
Blooms: Understand
Learning Objective: 06-04 Describe the accounting treatment of repair and maintenance expenditures.
8. The present value concept is widely applied in business because:
A. inflation erodes the purchasing power of money.

B. money has value over time.
C. accounting for operating leases requires its use.
D. most obligations are settled within a year.
AACSB: Analytic
AICPA FN: Measurement
Blooms: Remember
Learning Objective: 06-10 Explain the role of time value of money concepts in financial reporting and their usefulness in
decision making.
6-14
9. When an accelerated depreciation method is used to calculate depreciation expense:
A. the net book value of the asset halfway through its useful life will be less than if straight-line
B. the net book value of the asset at the end of its useful life will be less than if straight-line
C. depreciation expense will be less in the early years of the asset's life than if straight-line
D. the accumulated depreciation account balance will increase by a larger amount in the last
half of an asset's life than if straight-line depreciation is used.
AACSB: Reflective Thinking

Blooms: Analyze
Difficulty: 3 Hard
10. Moped, Inc. purchased machinery at a cost of $22,000 on January 1, 2014. The expected
useful life is 5 years and the asset is expected to have salvage value of $2,000. Moped
depreciates its assets using the double-declining balance method.
What is the firm's depreciation expense for the year ended December 31, 2014?
A. $2,000
B. $4,400
C. $6,000
D. $8,800
AACSB: Analytic
Blooms: Apply
6-15
What is the accumulated depreciation for this asset on December 31, 2015?
A. $4,400
B. $5,280
C. $8,800
D. $14,080
AACSB: Analytic
AICPA FN: Reporting
Blooms: Apply
Difficulty: 3 Hard
What is the firm's gain or loss if the machinery is sold for $11,000 on December 31, 2015?
A. Gain of $4,000
B. Gain of $3,080
C. Loss of $600
D. Loss of $4,000
AACSB: Analytic
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 06-06 Describe the effect on the financial statements of the disposition of noncurrent assets; either by sale
or abandonment.
13. When a machine having a net book value of $5,000 is sold for $4,000:
A. current assets decrease, equipment (net) increases, and net income increases.
B. current assets increase, equipment (net) decreases, and net income increases.
C. current assets increase, equipment (net) decreases, and net income decreases.
D. current assets increase, equipment (net) increases, and net income decreases.

AICPA FN: Reporting
6-16
Blooms: Apply
Difficulty: 3 Hard
or abandonment.
14. If there is a loss on the disposal of a depreciable asset:
A. no cash was received in the disposal transaction.

B. the net book value of the asset was negative.
C. in retrospect, the life over which the asset was depreciated was too short.
D. in retrospect, the depreciation expense recognized over the asset's life was too low.

Blooms: Create
or abandonment.
15. Which of the following could be a correct journal entry to record the disposition of equipment?
A. Option A
B. Option B
C. Option C
D. Option D
AACSB: Analytic
6-17
AICPA FN: Reporting
Blooms: Understand
Difficulty: 3 Hard
or abandonment.
depreciation methods for buildings?
C. Straight line.
D. Buildings are not depreciable assets.
AACSB: Analytic
Blooms: Remember
Difficulty: 3 Hard
depreciation methods for land?
C. Straight line.
D. Land is not a depreciable asset.
AACSB: Analytic
Blooms: Remember
18. If an organization has an obligation to pay $5,000 to a supplier two years from now, the
present value of the obligation:
A. is less than $5,000.

B. is $5,000.
C. is more than $5,000.
D. could be calculated using an annuity factor from the present value tables.
AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
6-18
decision making.
19. Depreciation, in accounting, is a process that results in:
A. depreciable assets being reported in the balance sheet at their fair value.
B. accumulating cash for the replacement of the asset.
C. an accurate measurement of the economic usefulness of an asset.
D. spreading the cost of an asset over its useful life to the entity.
AACSB: Analytic
AICPA FN: Reporting
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-01 Explain how the cost of land; buildings; and equipment is reported on the balance sheet.
20.
The present value of $3,000 to be received in 7 years at 10% is:
A. $616.22.
B. $1,539.60.
C. $3,000.00.
D. $5,845.67.
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
decision making.
6-19
21.
The present value of $3,000 to be received every year for 9 years, at 10%, is:
A. $7,073.80.
B. $12,273.00.
C. $17,277.00.
D. $27,000.00.
AACSB: Analytic
Blooms: Apply
Difficulty: 1 Easy
decision making.
22.
The present value of an obligation of $4,000 payable in 7 years at 8% is:
A. $1,760.
B. $2,334.
C. $3,206.
D. $3,680.
AACSB: Analytic
AICPA FN: Reporting
Blooms: Apply
Difficulty: 1 Easy
decision making.
6-20
23.
A particular common stock has an annual cash dividend of $2.00 per share and is predicted to
have a market value of $30 per share 5 years from now. Assuming a discount rate of 10%, a
fair market price for the stock today is:
A. $20.00.
B. $26.21.
C. $37.58.
D. $56.21.
AACSB: Analytic
Blooms: Create
Difficulty: 3 Hard
decision making.
24.
Psyche Company wants to acquire Trim Company. Trim's ROI has been above average for its
industry; net income has averaged $70,000 a year more than the industry average. These
"excess" earnings are expected to continue at this amount for 5 years. Assuming a discount
rate of 8%, how much goodwill will arise from Psyches' purchase of Trim?
A. $40,836
B. $88,157
C. $279,489
D. $350,000
AACSB: Analytic
Blooms: Analyze
Difficulty: 3 Hard
Learning Objective: 06-09 Discuss the meaning of various intangible assets; how their values are measured; and how their
costs are reflected in the income statement.
6-21
25. Leasehold is an example of which of the following types of assets?
A. Current asset.
B. Property, plant and equipment.
C. Goodwill.
D. Intangible asset.
AACSB: Analytic
AICPA FN: Reporting
Blooms: Remember
26. The principal challenge to calculating depletion is estimating:
A. the cost of the asset.

B. the salvage value of the exploration equipment.
C. the demand for the product.
D. the quantity of material to be recovered.
AACSB: Analytic
Blooms: Understand
27. Noncurrent, intangible assets such as leasehold improvements, patents, and copyrights are all
subject to:
A. depreciation.
B. amortization.
C. depletion.
D. consolidation.
AACSB: Analytic
Blooms: Remember
6-22
28. When a depreciable asset is sold:
A. a gain arises if the sales proceeds exceed the net book value.
B. a loss arises if the sales proceeds exceed the net book value.
C. any cash received results in a gain.
D. depreciation expense is adjusted so there is no gain or loss.
AACSB: Analytic
AICPA FN: Reporting
Blooms: Remember
or abandonment.
29. Goodwill is an asset that arises because the present value of an acquired company's
estimated future earnings, discounted at the acquiring firm's ROI:
A. is less than the fair value of the net assets of the acquired company.
B. is more than the fair value of the net assets of the acquired company.
C. is more than the fair value of the net assets of the acquiring company.
D. is less than the fair value of the net assets of the acquiring company.
AACSB: Analytic
AICPA FN: Reporting
Blooms: Understand
30. The intangible asset goodwill:
A. represents the management team's assessment of its value to the company.

B. may arise when one company purchases another company.
C. arises because the fair value of a company's assets is greater than cost.
D. all of these are correct.
AACSB: Analytic
AICPA FN: Reporting
Blooms: Remember
Difficulty: 1 Easy
6-23
31. Accounting for natural resources:
A. involves using the accumulated depreciation account.

B. involves estimating the quantity of the natural resource to be recovered.
C. involves an exception to the matching concept.
D. involves a sum-of-the-year's-digits depletion calculation.
AACSB: Analytic
Blooms: Remember
32. Which of the following is not a term that describes part of the accounting for noncurrent
assets?
A. Accumulation.
B. Depletion.
C. Amortization.
D. Depreciation.
AACSB: Analytic
AICPA FN: Reporting
Blooms: Remember
33. Many companies use accelerated depreciation for tax purposes because:
A. it is easier to calculate than straight-line depreciation.

B. it reflects the amount of cash used in depreciation.
C. it results in lower taxable income than straight-line depreciation.
D. it is used for determining net income reported to stockholders.
AACSB: Analytic
Blooms: Understand
Difficulty: 1 Easy
6-24
Essay Questions
34. Lone Star Sales & Service acquired a new machine that cost $42,000 in early 2013. The
machine is expected to have a five-year useful life and is estimated to have a salvage value of
$7,000 at the end of its life. (Round your final answers to the nearest dollar.)
(a.) Using the straight-line depreciation method, calculate the depreciation expense to be
recognized in the second year of the machine's life and calculate the accumulated
depreciation after the third year of the machine's life.
(b.) Using the double-declining-balance depreciation method, calculate the depreciation
expense for the third year of the machine's life and the net book value of the machine at this
point in time.
(a) Depreciation expense = ($42,000 - $7,000)/5 = $7,000 per year

After three years the accumulated depreciation = $7,000 * 3 = $21,000.
(b) Straight-line rate = 1/5 = 20% * 2 = 40% Double-declining-balance rate
* Depreciation expense = Net book value on 1/1 * 40%
AACSB: Analytic
Blooms: Apply
6-25
Accounting What the Numbers Mean Marshall 10th Edition Test Bank
35. Goodwill results from the purchase of one firm by another for a price that is greater than the
fair value of the net assets acquired. On January 1, 2014, Blue Grass Co. purchased Red
Grass Co. for $1,200,000 when the net assets were valued at $1,000,000. Goodwill will be
tested annually for impairment. Assume that after the first year there was an impairment of
$15,000.
Required:
(a.) Compute the value of goodwill to be recorded on the books of Blue Grass Company upon
the purchase of the business.
(b.) What is impairment and how is the first year's impairment recorded in the books?
(a.) Goodwill = $1,200,000 - $1,000,000 = $200,000.

(b.) Impairment of goodwill occurs when the book value of goodwill exceeds its fair value; an
impairment loss is recorded in an amount equal to the excess.
The entry to record the impairment would be:
AACSB: Analytic
AICPA FN: Reporting
Blooms: Analyze
6-26
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Accounting for and Presentation of Property, Plant, and Equipment, and

Multiple Choice Questions

2. Expenditures capitalized as long-lived assets generally include those expenditures that:

3. Which of the following accounting concepts/principles is most significant in the development of a

A. Matching of revenue and expense.

5. The entry to record depreciation expense:

A. increases a contra asset and decreases net income.

6. The net book value of a depreciable asset is:

A. the fair value of the asset.

A. uses an accelerated depreciation method for book purposes.

8. The present value concept is widely applied in business because:

A. inflation erodes the purchasing power of money.

14. If there is a loss on the disposal of a depreciable asset:

A. no cash was received in the disposal transaction.

A. is less than $5,000.

19. Depreciation, in accounting, is a process that results in:

The present value of $3,000 to be received in 7 years at 10% is:

The present value of an obligation of $4,000 payable in 7 years at 8% is:

25. Leasehold is an example of which of the following types of assets?

26. The principal challenge to calculating depletion is estimating:

A. the cost of the asset.

30. The intangible asset goodwill:

A. represents the management team's assessment of its value to the company.

31. Accounting for natural resources:

A. involves using the accumulated depreciation account.

A. it is easier to calculate than straight-line depreciation.

Multiple Choice Questions

2. Expenditures capitalized as long-lived assets generally include those expenditures that:

A. Matching of revenue and expense.

5. The entry to record depreciation expense:

A. increases a contra asset and decreases net income.

A. the fair value of the asset.

A. uses an accelerated depreciation method for book purposes.

8. The present value concept is widely applied in business because:

A. inflation erodes the purchasing power of money.

AACSB: Reflective Thinking

AACSB: Reflective Thinking

14. If there is a loss on the disposal of a depreciable asset:

A. no cash was received in the disposal transaction.

AACSB: Reflective Thinking

A. is less than $5,000.

19. Depreciation, in accounting, is a process that results in:

The present value of $3,000 to be received in 7 years at 10% is:

The present value of an obligation of $4,000 payable in 7 years at 8% is:

26. The principal challenge to calculating depletion is estimating:

A. the cost of the asset.

30. The intangible asset goodwill:

A. represents the management team's assessment of its value to the company.

A. involves using the accumulated depreciation account.

A. it is easier to calculate than straight-line depreciation.

(a) Depreciation expense = ($42,000 - $7,000)/5 = $7,000 per year

(b) Straight-line rate = 1/5 = 20% * 2 = 40% Double-declining-balance rate

* Depreciation expense = Net book value on 1/1 * 40%