Advanced Accounting Chapter 7 Review

The original cost of a plant asset minus accumulated depreciation is called the

• book value of a plant asset

• salvage value of a plant asset

• depreciable value of a plant asset

• useful life of a plant asset

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

Heisey's Housing paid $15,000 to have its apartments repainted. The apartments originally cost $200,000. The recorded cost of the apartments after being repainted is

• $185,000

• $200,000

• $215,000

The decrease in the value of a plant asset because of the removal of a natural resource is

• declining-balance

• depletion

• units-of-production

• straight-line

A method for calculating partial-year depreciation that recognizes a full year’s depreciation if the asset is purchased in the first half of the year is

• MACRS

• the half-year convention

• the modified half-year convention

• straight line method

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

Sibbach Stores, Inc., bought display shelves for $10,000.00. They have an estimated salvage value of $2,000.00 and an estimated useful life of 4 years. The yearly depreciation expense using the straight-line method is $1,000.00.

• True

• False

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 depreciated, because it is considered to have an infinite useful life. This makes land unique among all asset types; it is the only one for which depreciation is prohibited.

• True

• False