E9-4 Tom Parkey has prepared the following list of statements about depreciation
ID: 2571884 • Letter: E
Question
E9-4 Tom Parkey has prepared the following list of statements about depreciation. 1. Depreciation is a process of asset valuation, not cost allocation. 2. Depreciation provides for the proper matching of expenses with revenues. 3. The book value of a plant asset should approximate its fair value. 4. Depreciation applies to three classes of plant assets: land, buildings, and equipment. 5. Depreciation does not apply to a building because its usefulness and revenue-producing 6. The revenue-producing ability of a depreciable asset will decline due to wear and tear 7. Recognizing depreciation on an asset results in an accumulation of cash for replacement 8. The balance in accumulated depreciation represents the total cost that has been 9. Depreciation expense and accumulated depreciation are reported on the income life, salvage value ability generally remain intact over time and to obsolescence. of the asset. charged to expense statement. 10. Four factors affect the computation of depreciation: cost, useful l and residual value. Instructions Identify each statement as true or false. If false, indicate how to correct the statement.Explanation / Answer
1)False it is cost allocation and not asset valuation
2)True
3)False The book value is different from market value and it can be more or less
4)False it applies only to building and equipment
5)False.The explanantion given shoul be for land and not buildings
6)True
7)False It is not accumulation of cash but accumulation of cost
8)True
9)False since only depreciation expense is reported in income statement and accumulated depreciaition in balance sheet
10) False since salvage value is same as residual value so it is three
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