Nn. 122. In the summation (cost) method of valuation, which of the following steps is the ONLY one that a valuer would take in estimating value?a.Estimate the net operating income of the property.b.Determine the value of the land using the Assessed Annual Value and tax rate.C.Estimate the accrued depreciation.d.Calculate the acquisition price of the construction material used when the structure was built.

The summation method of valuation or cost method of valuation is the technique that is used to make…

Answered: In the summation (cost) method of…

Auditing: A Risk Based-Approach (MindTap Course List)

11th Edition

ISBN:9781337619455

Author:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Publisher:Karla M Johnstone, Audrey A. Gramling, Larry E. Rittenberg

Chapter12: Auditing Long-lived Assets And Merger And Acquisition Activity

Section: Chapter Questions

Problem 20CYBK

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In the summation (cost) method of valuation, which of the following steps is the ONLY one that a valuer would take in estimating value? a. Estimate the net operating income of the property. b. Determine the value of the land using the Assessed Annual Value and tax rate. c. Estimate the accrued depreciation. d. Calculate the acquisition price of the construction material used when the structure was built.
Why is depreciation expense recognized? Select one: a. To provide a better estimate of the market value of the depreciated assets. b. So that the balance sheet value of plant assets will more accurately reflect the replacement cost of the assets. c. To ensure that cash will be available at the end of the assets' useful life in order to replace it. d. To match the cost of the asset against the revenue using a reasonable allocation. method. Save AnswersNext
Which of the following answers is the correct formula for determining the historical cost of an asset? Select one: O a. historical cost = original value of the asset - accumulated depreciation. O b. historical cost = the basic purchase price of the asset minus any other costs necessary to prepare the asset ready for use. O c. historical cost = the basic purchase price of the asset plus any other costs necessary to prepare the asset ready for use. O d. historical cost = the basic purchase price of the asset only.
Which of the following statements if not true? a. Depreciation is the process of allocating the purchase price of an asset minues its residual value to expense, for each period benefited by the asset. b. The cost of an asset includes all acquisition costs necessary to obtain the benefits to be derived from the asset. c. The service life of an asset is the measure of the number of years of service expected from the asset before its disposal. d. The residual value of an asset is the difference between the expected book value of the asset at the end of its service and the cost of disposal.
We normally record a long-term asset at the a. Cost of the asset only.b. Cost of the asset plus all costs necessary to get the asset ready for use.c. Appraised value.d. Cost of the asset, but subsequently adjust it up or down to appraised value.
In calculating depreciation, both the long-lived asset's cost and useful life are based on estimates. Select one: O True O False
An estimate of how an asset will be used up over its useful life is known as what? a. Depreciation rate b. Impairment value c. Useful life d. Salvage value
The following formula is used to calculate depreciation for the Depreciation expense = (Original cost - Salvage value) Depreciation rate O Tax-based depreciation O Accelerated method of depreciation O Straight-line method Activity method
What costs should be included when measuring the total cost to acquire a long-term asset?
Which of the following best describes depreciation? A.ccounts for the market value of a physical asset B.Part of the cost of a physical asset allocated as an expense to each time period in which the asset is used. C.Shows the increase in value of a physical asset over the asset’s useful life D.Shows the drop in value of an asset when the asset is first used by an entity
In view of the investor, what is the best type of depreciation method? Justify your answer in terms of computation.
Estimates of an asset's salvage value and usable life are used to determine depreciation costs. Is this statement correct or incorrect?

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