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?

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?

Century 21 Accounting General Journal

11th Edition

ISBN:9781337680059

Author:Gilbertson

Publisher:Gilbertson

Chapter19: Accounting For Plant Assets, Depreciation, And Intangible Assets

Section19.2: Calculating Depreciation Expense

Problem 1AYU

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Respond to the following in a minimum of 175 words: 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?
Explain the reasons for the impairment and the justification for treating the write-down as a permanent decline in value of the asset(s). A difference between the book value of plant assets and the fair value generally exists.Explain the role technology and obsolescence have in the impairment of assets.
Which of the following statements is (are) correct?a. Accumulated depreciation represents a cash fund beingaccumulated for the replacement of plant assets.b. The cost of a machine includes the cost of repairingdamage to the machine during the installation process.c. A company may use different depreciation methods inits financial statements and its income tax return.d. The use of an accelerated depreciation method causesan asset to wear out more quickly than does use of thestraight-line method.
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.
Which one of the following items is not a consideration when recording periodic depreciation expense on plant assets? a. Salvage value b. Estimated useful life c. Cash needed to replace the plant asset d. Cost
Property, plant and equipment (fixed assets) assets are depreciated because: a. The accrual basis of accounting requires matching of costs to revenues. b. Cash basis of accounting requires depreciation. c. The book values equal market values. d. The replacement cost of plant assets may fluctuate over time.
Does the balance in the Accumulated Depreciation— Machinery account represent funds to replace the machinery when it wears out? If not, what does it represent?
Explain how asset impairment differs from depreciation, depletion, and amortization. How do companies measure impairment losses for property, plant, and equipment and intangible assets with finite useful lives?
The unrealized gains and losses from intercompany transactions involving plant assets might be eventually realized. Does it make any difference if these assets are depreciable or non-depreciable? Explain.
Why are the costs of plant/long term assets recovered through depreciation vs. expensed out during the period purchased?
On your own words, describe the methods that companies can implement to depreciate plant assets.
Why would a company choose to depreciate one piece of equipment using the double-declining-balance method and another piece of equipment using straightline depreciation?