College Accounting - Ch 10

Which of the following asset categories would include the cost of clearing land and removing unwanted​ buildings?

• machinery and equipment

• land improvements

• land

• buildings

When a company uses the straight−line method of​ depreciation, the amount of depreciation charged to expense will be reduced from year to year.

• True

• False

The use of the Modified Accelerated Cost Recovery System​ (MACRS) is acceptable for financial reporting under GAAP.

• True

• False

The process by which businesses spread the allocation of a natural​ resource's cost over its usage is known as depletion.

• True

• False

The cost principle requires a business to record the assets​ acquired, or services​ received, at their actual cost.

• True

• False

All plant assets are depreciated.

• True

• False

The book value of a plant asset is reported on the balance sheet as the cost of the asset minus accumulated depreciation.

• True

• False

If a business purchases a piece of equipment on March 16 and uses the modified

half−month ​convention, it will still depreciate for the full month of March.

• True

• False

Which of the following is true when the estimate of an​ asset's useful life is​ changed?

• The new estimate is ignored until the last year of the​ asset's life.

• Prior​ years' financial statements must be restated.

• The depreciation expense in the prior years is restated.

• The​ asset's remaining depreciable book value will be spread over the​ asset's new useful life.

When a plant asset is disposed​ of, the business must​ ________.

• ensure that the plant asset is obsolete or worn out

• comply with the conservatism principle and record losses but not gains

• immediately replace it

• bring the depreciation up to date