Quiz 3

Total depreciation expense over an asset's useful life will be identical under all methods of depreciation

• True

• False

The straight-line depreciation method and the double-declining-balance depreciation method:

• Are acceptable for tax purposes only.

• Are the only acceptable methods of depreciation for financial reporting.

• Produce the same total depreciation over an asset's useful life.

• Produce the same depreciation expense each year

Additions to land that increase the usefulness of the land such as parking lots, fences, and lighting are not depreciated.

• True

• False

The cost of land does not include

• real estate brokers' commission

• annual property taxes

• accrued property taxes assumed by the purchaser.

• title fees.

An accelerated depreciation method yields larger depreciation expense in the early years of an asset's life and less depreciation expense in later years

• True

• False

Natural resources are generally shown on the balance sheet under 

• Intangibles

• Investments

• Property, Plant, and Equipment.

• Owner's Equity

The units-of-activity method is generally not suitable for

• airplanes.

• buildings

• delivery equipment.

• factory machinery

General Molding is building a new plant that will take three years to construct. The 
construction will be financed in part by funds borrowed during the construction period. 
There are significant architect fees, excavation fees, and building permit fees. Which of 
the following statements is true? 

• Excavation fees are capitalized but building permit fees are not.

• Architect fees are capitalized but building permit fees are not.

• Interest is capitalized during the construction as part of the cost of the building.

• The capitalized cost is equal to the contract price to build the plant less any interest on borrowed funds.

Once the estimated depreciation expense for an asset is calculated:

• It may be revised based on new information

• The estimate itself cannot be changed; however, new information should be disclosed in financial statement footnotes.

• Any changes are accumulated and recognized when the asset is sold

• It cannot be changed, based on the historical cost principle

Plant assets are reported on a balance sheet at their undepreciated costs (book value), not at fair (market)

• True

• False