Accounting 291 Exam 3

Four factors affect the computation of depreciation: cost, useful life, salvage value, and residual value.

false (cost, useful life, and salvage value which is also called residual value)

Depreciation applies to three classes of plant assets: land, buildings, and equipment.

false (depreciation applies to three classes of plant assets: land IMPROVEMENTS, buildings, and equipment)

Depreciation expense and accumulated depreciation are reported on the income statement.

false (depreciation expense is reported on the income statement, but accumulated depreciation is recorded on the balance sheet)

depreciation is a process of asset valuation, not cost allocation.

false (depreciation is the process of cost allocation, not asset valuation)

The balance in accumulated depreciation represents the total cost that has been charged to expense since placing the asset in service.

true

The revenue-producing ability of a depreciable asset will decline due to wear and tear and to obsolescence.

true

depreciation provides for the proper matching of expenses and revenues

true

Depreciation does not apply to a building because its usefulness and revenue-producing ability generally remain intact over time.

false (it does not apply to land because its usefulness and revenue-producing ability generally remain intact over time)

Recognizing depreciation on an asset results in an accumulation of cash for replacement of the asset.

false (it does not result in an accumulation of cash for replacement of the asset)

the book value of a plant asset should approximate its fair value

false (the book value of a plant asset MAY BE QUITE DIFFERENT than it's market value)