11.JME acquired an asset on January 1, 2004, for $60,000 cash. At that time JME estimated the asset would last 10 years and have no salvage. During 2006 JME estimated the remaining life of the asset to be only three more years with a salvage value of $3,000. If JME uses straight line depreciation, what is the depreciation expense for 2006?

A)   $6,000.

B)   $15,000.

C)   $12,000.

D)   $16,000.

12.On January 1, 2004, JME purchased a truck that cost $24,000. The truck had an estimated useful life of 5 years and $4,000 salvage value. The amount of depreciation expense recognized in 2006 assuming that JME uses the double declining balance method is:

A)   $4,000.

B)   $5,760.

C)   $3,456.

D)   $8,000.

13.Which one of the following statements regarding the financial statement effects of inflation is least accurate? In an inflationary period:

A)   reported return on assets and return on equity are lower than they would be without inflation.

B)   depreciation based on historical costs will not be sufficient to replace the asset.

C)   depreciation based on the current cost of the asset (rather than historical costs) will create superior future cash flow estimates.

D)   reported income and taxes are higher than they would be without inflation.

答案和详解如下：

11.JME acquired an asset on January 1, 2004, for $60,000 cash. At that time JME estimated the asset would last 10 years and have no salvage. During 2006 JME estimated the remaining life of the asset to be only three more years with a salvage value of $3,000. If JME uses straight line depreciation, what is the depreciation expense for 2006?

A)   $6,000.

B)   $15,000.

C)   $12,000.

D)   $16,000.

The correct answer was B)    

first two years =  (60,000 – 0)/10  =  6,000 per year

    yr. 2006     =  (60,000-12,000 – 3,000)/3  = 15,000

12.On January 1, 2004, JME purchased a truck that cost $24,000. The truck had an estimated useful life of 5 years and $4,000 salvage value. The amount of depreciation expense recognized in 2006 assuming that JME uses the double declining balance method is:

A)   $4,000.

B)   $5,760.

C)   $3,456.

D)   $8,000.

The correct answer was C)

yr. 2004 = 24,000 × 2/5 = 9,600

yr. 2005 = (24,000-9,600) × 2/5 = 5,760

yr. 2006 = (24,000-9,600-5,760) × 2/5 = 3,456

13.Which one of the following statements regarding the financial statement effects of inflation is least accurate? In an inflationary period:

A)   reported return on assets and return on equity are lower than they would be without inflation.

B)   depreciation based on historical costs will not be sufficient to replace the asset.

C)   depreciation based on the current cost of the asset (rather than historical costs) will create superior future cash flow estimates.

D)   reported income and taxes are higher than they would be without inflation.

The correct answer was A)

Inflation has the effect of reducing the ability of depreciation expenses to reflect replacement costs (accelerated depreciation is closest, but still not adequate). 

If the replacement cost of an asset is increasing, then depreciation based on historical cost will not be sufficient to "replace" the asset. In these cases of rising prices, reported income (and thus return on assets and return on equity ratios) and taxes are too high. This is a difficult but important consideration for analysis. 

The two key issues are the correct useful life of the asset and the correct rate of economic depreciation. Depreciation based on the current cost of the asset (as opposed to its historical cost) is superior in predicting future cash flow. For example: An asset with a 3-year life is purchased for $3,000 and depreciated using straight line at $1,000 a year. After 3 years, the asset is replaced at a cost of $5,000 (inflation). Total depreciation expense is an insufficient measure of replacement cash outflow. Depreciation based on current cost would measure the 3 year expense at $5,000 which is cash required for replacement.