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- LO1 The purpose of depreciation is to (a) spread the cost of an asset over its useful life. (b) show the current market value of an asset. (c) set up a reserve fund to purchase a new asset. (d) expense the asset in the year it was purchased.LO1 The purpose of depreciation is to record the assets market value in the accounting records.What is a relevant cost? Explain why depreciation on an existing asset is always irrelevant.
- Why is depreciation that has been recognized over the life of an asset shown in a contra account? Why not just reduce the asset account?The book value of a depreciable asset is A. The original cost of the asset. B. The original cost of the asset less its accumulated depreciation. C. The original cost of the asset less its salvage value. D. The accumulated depreciation on the asset. E. None of these.1. What amount should be recorded initially as cost of the right of use asset? 2. What is the annual depreciation of the right of use asset?
- What characteristics of a plant asset make it different from other assets? Why does GAAP require depreciation for certain plant assets? The balance in an Accumulated Depreciation - Equipment account does not represent funds to replace the equipment when it wears out; instead, what does it represent?Which of the following statements about depreciation is not true? A. Depreciation does not mirror the actual loss of value over time. B. Depreciation is the allocation of the asset’s cost to expense over the expected years of use. C. If the fair value of the asset increases, depreciation is reversed to reflect the change in value. D. U.S. GAAP requires depreciation methods to be systematic and rational.Is Penny correct? Do the terms depreciation, depletion, and amortization all mean the same thing?
- What is the effective life of an asset? a. The total period of ownership of the asset, including when it is not installed and ready for use.. b. The period prior to the asset being abandoned or scrapped. c. The period that the asset can be used for income-producing purposes. d. All of the above.According to IAS 16 Property, Plant and Equipment, which, if any, of the following statements about depreciation are correct? 1.The main purpose of depreciation is to reflect the fall in value of an asset over its useful life 2.When an asset is revalued, subsequent depreciation relating to the amount of the revaluation should be debited to the revaluation surplus rather than to the income statement 3.The provision for depreciation ensures that there are funds available to replace an asset when this becomes necessary, though in times of inflation, additional amounts may need to be set aside 4.A change in depreciation method constitutes a change in accounting policy and must be accounted for as suchWhich statement concerning depreciation is false? a.The only property that has a determinable life is depreciable. B.Land is not depreciable. C.Intangible assets' capital costs are recovered through amortization, much like depreciation. D.Personal property converted to business use is not depreciable since it was once used for personal purposes.
