Accounting Chapter 3

Book Value

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

Depreciation

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

Disposal Value

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

Depreciation Expense is reported on the income statement int eh cost of goods sold section. True or False

Depreciation Expense is reported on the income statement int eh cost of goods sold section. True or FAlSE

Accumulated Depreciation is classified as a contra plant asset account.

True

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

True

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

True

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

True

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.

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

False

All plant assets, including land, depreciate in value.

False

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

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.

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

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.