7. Expenditures that maintain the operating efficiency and expected productive l

Question

7. Expenditures that maintain the operating efficiency and expected productive life of a plant a. considered to be repairs and maintenance expenditures. b. capitalized as a part of the cost of the asset. debited to the Accumulated Depreciation account. not recorded until they become material in amount. C. d. 8. Depreciation is a process of a. asset devaluation. b. cost accumulation. cost allocation. asset valuation. d. 9. In computing depreciation, salvage value is a. the fair value of a plant asset on the date of acquisition. b. subtracted from accumulated depreciation to determine the plant asset's depreciable cost. an estimate of a plant asset's value at the end of its useful life ignored in all the depreciation methods c. d. 10. Depletion is a. a decrease in market value of natural resources. b. the amount of spoilage that occurs when natural resources are extracted. the allocation of the cost of natural resources to expense. the method used to record unsuccessfül patents.

Explanation / Answer

7. a) Considerd to be repairs and maintenance expenditure.

costs that are not expensed immediately but are instead included in a plant asset account expenditures to maintain the operating efficiency and expected productive life of the unit.

8. Depreciation is a process of cost allocation not of the valuation.

Depreciation accounting is a system of accounting which aims to distribute the cost of tangible capital assets, less salvage (if any) over the estimated useful life of the unit in a systematic and rational manner. It is a process of allocation, not of valuation.

9. In computing depreciation,solvage value is an estimate of a plan asstes value at the end of it's useful life.

Salvage value is the estimated amount that an asset is worth at the end of its useful life. It is also known as scrap value or residual value and is used to determine the annual depreciation expense of an asset. The value of the asset is recorded on a company’s balance sheet, while the depreciation expense is recorded on its income statement.

10. Depletion is the allocation of the cost of natural resources to expense.

All three terms refer to an allocation of costs to expense over time. Allocation of tangible assets to expense is generally called amortization and reduces the carrying value of tangibles.

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