QUESTION: 109

is the method that produces the largest, quickest depreciation deductions is the one most often selected by closely held businesses, since they are most eager to minimize reported taxable income.

MACRS
Declining balance method
Straight line method
Sum-of-years

Answer(s): A

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QUESTION: 110

Depletion is relatively easy to define; it is very difficult to measure. Because of:

Percentage depletion
Unrelated depletion methods
Reasonable estimates can be subject to wide variations
None of these

Answer(s): C

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QUESTION: 111

Impairment is the difference in value between the carrying amount of goodwill and the actual fair value of the goodwill. However, for federal income tax reporting purposes:

The cost of developing, maintenance, or restoring intangibles which are unidentifiable, have indeterminate lives, or are inherent in a continuing enterprise should be expensed as incurred.
Such intangibles assets which are purchased must be carried at cost and amortized over their useful lives and cannot be written down or written off at date of acquisition.
Identifiable intangible assets with an indefinite life should not be amortized
The cost of developing, maintenance, or restoring intangibles which are unidentifiable, have indeterminate lives, or are inherent in a continuing enterprise should be expensed as incurred. By contrast, such intangibles assets which are purchased must be carried at cost and amortized over their useful lives and cannot be written down or written off at date of acquisition.

Answer(s): D

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QUESTION: 112

In comparing companies with very different accounting practices, one way for an analyst to adjust for intangible items on the financial statements is to eliminate:

All intangible assets from the balance sheets
All amortization expense from the income statements
Identifying the true economic value
Both A and B

Answer(s): D

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