Accounting 2 RB Chapter 8 MC & TF

figgins, inc. purchased a truck that it expects to drive 100,000 miles over its useful life. the cost of the truck was $32,000. its estimated salvage value is $2,000, and its useful life is expected to be 5 years. the depreciation rate that would be used for the production-unit method would be

$0.30 per mile

when the declining-balance depreciation method is used, the annual depreciation expense id calculated using the

beginning book value for the current year

The original cost of a plant asset minus accumulated depreciation is called the

book value of a plant asset

the decrease in the value of a plant asset because of the removal of the natural resource is

depletion

at the end of the estimated useful life of a plant asset, it should be depreciated down to its original cost

false

businesses most often use the trade-in price listed by the manufacturer as the estimated salvage value

false

land is not subject to depreciation bc land values usually increase overtime

false

no matter which depreciation method is used, the adjusting entry to record depreciation involves a debit to accumulated depreciation and a credit to depreciation expense

false

since trees are a renewable source, logging businesses record depreciation on the land that contains the timber stands

false

the gain or loss on a traded asset equals the original cost of the old asset less its accumulated depreciation plus the original cost of the new asset

false

the tax rate on real property in the country is 5%. if a buildings book value is $75,000 and its addressed value is $60,000, the annual property tax would be $3,750

false

to charge more depreciation expense in the early years of a plant assets life, the declining-balance method applies a larger percentage rate in those early years

false

when applying the sum-of-the-years-digits depreciation method, the denominator used for all plant assets is 15

false

when land and building are purchased for a single price, the purchase is recorded to a single plant asset account title land and bulidings

false

which of the following is NOT a factor in calculating a plant asset's depreciation expense

method of disposal

the smallest unit of time used to calculate depreciation is

month

land and anything attached to it is called

real property

the method of depreciation calculated by using fractions based on the number of years of a plant assets useful life is

sum-of-the-years-digits

when an asset is traded, the original cost of the new asset recorded in the accounting records is

the cash paid plus the book value of the asset traded

when the plant asset with a book value is discarded at the beginning of a fiscal year, the two journal entries needed are

to remove the original cost of the plant asset and its related depreciation and to recognize the loss

an assets assessed value for property tax purposes may be different from the assets book value

true

the depreciation method required by the internal revenue is known as modified accelerated cost recovery system

true

the going concern concept states that financial statements are prepared with the expectation that a business will remain in operation indefinitely

true

to use the production-unit depreciation method for a vehicle, the estimated useful life must be stated in number of miles

true

wolford stores, inc., bought display shelves for $6,000. they have an estimated salvage value for $1,000 and an estimated useful life for 5 years . the yearly depreciation expense using the straight line method is $1,000

true