QUESTION 3 (15 marks) 1. The intangible asset goodwill may be a. capitalized onl

Question

QUESTION 3 (15 marks) 1. The intangible asset goodwill may be a. capitalized only when purchased. b. capitalized either when purchased or created internally. c. capitalized only when created internally. d. written off directly to retained earnings. 2. If an industrial firm uses the units-of-production method for calculating depreciation on its onbe plant asset, factory machinery, the credit to accumulated depreciation from period to period during the life of the firm will a. be constant. b. vary with unit sales. vary with sales revenue. vary with production. c. d. Use of the declining-balance method of depreciation a. results in a decreasing charge to depreciation expense. b. means residual value is not deducted in calculating the depreciation base. c. means the book value should not be reduced below residual value. d. all of these. 3.

Explanation / Answer

1)

The intangible asset goodwill may be

ANSWER = a) Capitalized only when purchased

2) If an industrial firm uses the unit of production method for calculating depreciation on its only plant asset, factory, machinery, the credit to accumulated depreciation from period to period during the life of the firm will:

Answer= d) vary with production.

3)  Use of the declining balance method of Depreciation

Answer = d) All of these

use of Declining method of depreciation results in a decreasing charge to depreciation expense, means salvage value is not deducted in computing the depreciation base, means the book value should not be reduced below salvage value.

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