Accounting Chapter 23

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Depreciation

Allocating the cost of a plant asset over the asset's useful life is called __.

False

The plant asset record does not list the accumulated depreciation of an asset or its book value at the end of each year.

False

The normal balance of Accum Dep - Computer Equip is a debit.

True

A company will often decide to replace, sell, or discard a plant asset while the asset still has some monetary value.

False

Current assets include cash, merchandise, equipment, and accounts receivable.

Book Value

The original cost of a plant asset less its accumulated depreciation is the __.

False

Depreciation Expense is classified as an expense, has a normal credit balance, and is reported on the income statement.

True

Depreciation Expense is recorded by an adjusting entry in the general journal.

False

Depreciation Expense is reported on the income statement in the cost of goods sold section.

True

Depreciation amounts are estimates of the decrease in value or usefulness of a plant asset over a period of time.

True

For accounting purposes, the cost of land is not depreciated.

True

If estimated annual depreciation is $3,600, a plant asset that was owned only 4 months during the year would have a depreciation expense of $1,200.

False

The adjusting entry for depreciation affects two accounts for each type of plant asset: Depreciation Expense and Delivery Equipment.

False

The amount of depreciation taken for a plant asset is usually recorded in the accounting records at the beginning of the fiscal period.

Current Assets

__ are either used up or converted to cash during a one-year accounting period.

Plant Assets

__ are long-lived assets that are used in the production or sale of other assets or services over several accounting periods

Straight-line depreciation

__ is a method of equally distributing the depreciation expense on a plant asset over its estimated useful life

Accumulated Depreciation

__ is the total amount of depreciation for a plant asset that has been recorded up to a specific point in time.

False

Accumulated Depreciation - Store Equipment is a contra asset account and is reported on the income statement.

True

Accumulated Depreciation is classified as a contra plant asset account.

False

Accumulated Depreciation is reported on the balance sheet as a liability.

False

All plant assets, including land, depreciate in value.

True

The book value of a plant asset is determined by subtracting the accumulated depreciation to date from the initial cost of the asset

True

The cost of a plant asset is the price paid for the asset plus taxes, installation charges and delivery charges.

True

The cost of a plant asset is the price paid for the asset when it is purchased, plus any installation and delivery charges.

True

The estimated disposal value of a plant asset is the part of the asset's cost the business expects to get back at the end of the asset's useful life.

Disposal Value

The estimated value of a plant asset at its replacement time is called __.

True

The straight line method of depreciation allocates the same amount of depreciation expense each year over the estimated useful life of the asset.


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