FIN. ACCT.-TOOLS FOR BUS.DEC.MAKING-CODE
9th Edition
ISBN: 9781119595724
Author: Kimmel
Publisher: WILEY C
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Chapter 9, Problem 9.4E
To determine
To Identify: each of the given statements as true or false.
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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 recording of expenses (efforts) with revenues (results).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 ability generally remain intact over time.6. The revenue-producing ability of a depreciable asset will decline due to wear and tear and to obsolescence.7. Recognizing depreciation on an asset results in an accumulation of cash for replacement of the asset.8. The balance in the Accumulated Depreciation account represents the total cost that has been charged to expense since placing the asset in service.9. Depreciation expense and accumulated depreciation are reported on the income statement.10. Four…
Depreciation is the allocation of the cost of a plant asset over its useful life in a rational and systematic manner. The asset being depreciated remains at historical cost and the accumulated depreciation account serves as a contra account to lower the asset balance on the books.
Question: Explain why this lowered value is, or is not, the market value of the asset in any given accounting period. Support your answer with examples explaining your choice.
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?
Chapter 9 Solutions
FIN. ACCT.-TOOLS FOR BUS.DEC.MAKING-CODE
Ch. 9 - Prob. 1QCh. 9 - Prob. 2QCh. 9 - Prob. 3QCh. 9 - Prob. 4QCh. 9 - Prob. 5QCh. 9 - Prob. 6QCh. 9 - Prob. 7QCh. 9 - Prob. 8QCh. 9 - Prob. 9QCh. 9 - In the fourth year of an assets 5-year useful...
Ch. 9 - Prob. 11QCh. 9 - Prob. 12QCh. 9 - Prob. 13QCh. 9 - Prob. 14QCh. 9 - Prob. 15QCh. 9 - Prob. 16QCh. 9 - Prob. 17QCh. 9 - Prob. 18QCh. 9 - Prob. 19QCh. 9 - Prob. 20QCh. 9 - Prob. 22QCh. 9 - Give an example of an industry that would be...Ch. 9 - Prob. 24QCh. 9 - Prob. 25QCh. 9 - Prob. 26QCh. 9 - Prob. 27QCh. 9 - Prob. 9.1BECh. 9 - Prob. 9.2BECh. 9 - Prob. 9.3BECh. 9 - Prob. 9.4BECh. 9 - Prob. 9.5BECh. 9 - Prob. 9.7BECh. 9 - Prob. 9.13BECh. 9 - Prob. 9.14BECh. 9 - Prob. 9.1DIECh. 9 - Prob. 9.2bDIECh. 9 - Prob. 9.3DIECh. 9 - Match the statement with the term most directly...Ch. 9 - Prob. 9.2ECh. 9 - Prob. 9.4ECh. 9 - Prob. 9.9ECh. 9 - Prob. 9.12ECh. 9 - Prob. 9.13ECh. 9 - Prob. 9.16ECh. 9 - Prob. 9.17ECh. 9 - Prob. 9.19ECh. 9 - Prob. 9.20ECh. 9 - Prob. 9.21ECh. 9 - Prob. 9.23ECh. 9 - Prob. 9.24ECh. 9 - Prob. 9.1APCh. 9 - Prob. 9.7APCh. 9 - Prob. 9.2EYCTCh. 9 - Prob. 9.3EYCTCh. 9 - Prob. 9.6EYCTCh. 9 - Prob. 9.7EYCTCh. 9 - Prob. 9.8EYCTCh. 9 - Prob. 9.10EYCTCh. 9 - CONSIDERING PEOPLE, PLANET, AND PROFIT The March...Ch. 9 - Prob. 9.1IECh. 9 - Prob. 9.2IECh. 9 - Prob. 9.3IECh. 9 - Prob. 9.4IE
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Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Similar questions
- 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.arrow_forwardThe general rule in the accounting treatment of research and development costs is A. Capitalize all costs as assets when incurred and amortized when revenue is earned. B. Treat all costs as current expenses as incurred. C. Capitalize selectively, and predetermine the conditions that would require capitalization as well as those that would be written off as current expenses. D. Accumulate all costs in a special intangible asset account until a determination can be made as to the degree of future benefits.arrow_forwardWhich statement about depreciation is false?a. A major objective of depreciation accounting is to allocate the cost of using an assetagainst the revenues it helps to generate.b. Depreciation should not be recorded in years in which the market value of the asset hasincreased.c. Obsolescence as well as physical wear and tear should be considered when determiningthe period over which an asset should be depreciated.d. Depreciation is a process of allocating the cost of an asset to expense over its usefullife.arrow_forward
- 1. Distinguish among depreciation, depletion and amortization. 2. Identify the factors that are relevant in determining the annual depreciation charge and explain whether these factors are determined objectively or whether they are based on judgment. 3. For what reasons are plant assets retired? Define inadequacy, supersession, and obsolescence. 4. What are the major factors considered in determining what depreciation method use? 5. List the similarities and the differences in accounting treatments of depreciation and cost depletion.arrow_forwardWhich one of the following statements is not true regarding depreciation? a. It is a systematic, rational method of allocating the cost of an asset over its useful life b. It attempts to match the costs of acquiring an asset to the benefits to bederived from the asset c. It does not attempt to measure the value of the asset d. It provides funds for the replacement of the asset through tax savings over the asset's lifearrow_forwardDepreciation, depletion, and amortization deductions are not available for some types of property; thus, the cost of the property is not recoverable at all. Please also include three examples of the types of assets that are not subject to "cost recovery" as part of your response to this question.arrow_forward
- 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.arrow_forwardWhich of the following statements about depreciation is false?: Depreciation does not apply to most buildings because their usefulness and revenue producing ability generally remain intact over time. Recording depreciation in each period is an application of the expense recognition (matching) principle. Depreciation is required because of wear-and-tear and technological obsolescence. The balance in accumulated depreciation represents the total cost that has been charged to expense since placing an asset in service.arrow_forwardWhich 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.arrow_forward
- 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?arrow_forwardWhy is the cost of certain kinds of property not recoverable at all by way of depreciation, depletion, or amortization deductions? In addition to answering that question, give three examples of the kinds of assets that are not subject to “cost recovery”.arrow_forwardPlace T or F in front of each of the following statements. 1. The straight-line method of depreciation is based on the assumption that depreciation expense can be regarded as a constant function of time. 2. Plant assets should be written down (below cost) when their market value has declined temporarily. 3. The accounting profession has developed specifically recommended procedures for recording appraisal increases with respect to plant assets. 4. An asset's cost minus its accumulated depreciation equals its book value. 5. The sum-of-the-years'-digits method of depreciation ignores salvage value in the computation of an asset's depreciable base. 6. When using the double-declining balance method of determining depreciation, a declining percentage is applied to a constant book value. 7. The book value of plant assets initially declines more rapidly under decreasing-charge methods than under the straight-line method. 8. Accounting depreciation is computed by…arrow_forward
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