Ch9

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20 Questions - Developed by: Karli - Developed on: - 5.060 taken

Acc201

  • 1
    All plant assets must be depreciated for accounting purposes
  • 2
    When purchasing land, the costs for clearing, draining, filling, and grading should be charged to a land improvements account
  • 3
    When purchasing delivery equipment, sales tax and motor vehicle licenses should be charged to deliver equipment
  • 4
    Land improvements are generally charged to the land account
  • 5
    Once cost is established for a plant asset, it becomes the basis of accounting for the asset unless the asset appreciates in value, in which case, market value becomes the basis for accountability
  • 6
    The book value of a plant asset is always equal to its fair market value
  • 7
    Recording depreciation each period is an application of the expense recognition principle
  • 8
    The accumulated depreciation account represents a cash fund available to replace plant assets
  • 9
    In calculating depreciation, both plant asset cost and useful life are based on estimates
  • 10
    Using the units-of-activity method of depreciating factory equipment will generally result in more depreciation expense being recorded over the life of the asset than if the straight line method had been used
  • 11
    Salvage value is not subtracted from plant asset cost in determining depreciation expense under the declining-balance method of depreciation
  • 12
    The declining balance method of depreciation is called an accelerated depreciation method because it depreciates an asset in a shorter period of time than the assets useful life
  • 13
    Under the double-declining-balance method, the depreciation rate used each year remains constant
  • 14
    The IRS does not require the taxpayer to use the same depreciation method on the tax return that is used in preparing financial statements
  • 15
    A change in estimated useful life of a plant asset may cause a change in the amount of depreciation recognized in current and future periods, but not to prior periods
  • 16
    A change in the estimated salvage value of a plant asset requires a restatement of prior years' depreciation
  • 17
    To determine a new depreciation amount after a change in estimate of a plant assets useful life, the assets remaining depreciable cost is divided by its remaining useful life
  • 18
    Additions and improvements to a plant asset that increase the assets operating efficiency, productive capacity, or expected useful life are generally expensed in the period incurred
  • 19
    A current liability must be paid out of current earnings
  • 20
    Current liabilities are expected to be paid within one year or the operating cycle, whichever is longer

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