Multiple choice

1. The periodic deduction allowed by the Internal Revenue Service to recover the cost of a business asset that is used more than one year is called:

A. depreciated value. 

B. recovered cost. 

C. specific cost. 

D. depreciation.

2. The amount of the periodic deduction is reported as _________ in the income statement and as an increase in the _________ of the asset in the balance sheet.

A. a decrease in asset value; value 

B. the current cost estimate; residual value 

C. depreciation expense; accumulated depreciation 

D. actual value; depreciation 

3. The _________ of an asset is the value reported in the balance sheet after deducting the accumulated depreciation from the total cost of the asset when it is placed in service.

A. book value 

B. retail price 

C. average cost 

D. specific cost 

4. The _________ method of depreciation allows a business to evenly distribute the cost of as asset over its useful life.

A. units of production 

B. straight-line 

C. sum-of-years’-digits 

D. declining-balance