1. Which of the following describes the purpose of depreciation?

a.To reflect the change in replacement cost of the asset.
b.To measure the change in market value of the asset.
c.To allocate the cost of an asset over its useful life.
d. All of the other answers describe the purpose of depreciation.

2. Which of the following statements about depreciation is correct?

a.The depreciation method selected has no impact on net income.
b.The straight-line depreciation method produces higher depreciation expense in the early years of an asset’s life.
c.Consistency requires that a company use the same depreciation method for all of its assets.
d.The depreciation method selected has no impact on cash flows.

3. If a company were filing a claim with an insurance company for manufacturing equipment damaged in a flood, what method of valuation for the equipment would be most relevant?

a.Net realizable value
b.Replacement cost
c.Depreciated historical cost
d.Historical cost

4. How is the cash purchase of capital assets reflected in a company’s cash flow statement?

a.An outflow in the Operating section.
b.An inflow in the Investing section.
c.Through the annual add back of depreciation expense to net income in the Operating section
d.An outflow in the Investing section

5. If an asset experiences obsolescence and becomes less efficient as time passes, which depreciation method would be most appropriate?

b.Usage based
c.Annuity based

I think DDBCB. A quick explanation would be great

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