FAR — Financial Accounting & Reporting — Quiz 50

Questions in this quiz (10)

1. Which of the following increases the carrying amount of an asset?

   • Depreciation expense
   • Asset impairment
   • Capital improvements
   • Asset disposal

2. Which cost should be expensed rather than capitalized?

   • Routine maintenance
   • Equipment purchase
   • Installation costs
   • Freight-in costs

3. Which best describes asset impairment?

   • Increase in asset value
   • Permanent reduction in asset value
   • Allocation of cost over time
   • Sale of an asset

4. Why is depreciation important in financial reporting?

   • It increases asset values
   • It allocates asset cost to benefiting periods
   • It increases revenue
   • It eliminates expenses

5. What is book value of an asset?

   • Original cost minus salvage value
   • Original cost minus accumulated depreciation
   • Market value minus liabilities
   • Replacement cost minus depreciation

6. Which event removes an asset and accumulated depreciation from records?

   • Asset purchase
   • Depreciation recording
   • Asset disposal
   • Asset impairment

7. If equipment is sold above book value, what is recorded?

   • Loss on disposal
   • Gain on disposal
   • Depreciation expense
   • Revenue

8. If equipment is sold below book value, what is recorded?

   • Gain on disposal
   • Loss on disposal
   • Revenue
   • Depreciation expense

9. Where are gains or losses from asset disposal reported?

   • Balance sheet
   • Income statement
   • Statement of cash flows
   • Statement of retained earnings

10. Which account is debited to remove accumulated depreciation during disposal?

    • Depreciation expense
    • Accumulated depreciation
    • Asset account
    • Cash