Advanced Accounting Chapter 7 Test Review

When land and building are purchased for a single price, the purchase is recorded to a single plant asset account entitled Land and Buildings.

• TRUE

• 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.

• TRUE

• FALSE

Land is not subject to depreciation because land values usually increase over time.

• TRUE

• FALSE

The Going Concern concept states that financial statements are prepared with the expectation that a business will remain in operation indefinitely.

• TRUE

• FALSE

To charge more depreciation expense in the early years of a plant asset’s life, the declining-balance method applies a larger percentage rate in those early years.

• TRUE

• FALSE

Since trees are a renewable resource, logging businesses record depreciation on the land that contains the timber stands.

• TRUE

• FALSE

An asset’s assessed value for property tax purposes may be different from the asset’s book value.

• TRUE

• FALSE

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

• the cash paid minus the book value of the asset traded

• the cash paid minus the original cost of the asset traded

• the cash paid plus the book value of the asset traded

• the cash paid plus the original cost of the asset traded

Using the double declining-balance method of depreciation, the final year’s depreciation should reduce the asset’s book value to its

• assessed value

• original cost

• salvage value

• useful life

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

• beginning book value for the current year

• ending book value for the current year

• original cost minus estimated salvage value

• salvage value plus the depreciable value