Chapter 10 - sdsdđcsdsdsygdusydgydsgdyusgdw PDF

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EXERCISE 10-4 1. False. Depreciation is a process of cost allocation, not asset valuation. 2. True. 3. False. The book value of a plant asset may be quite different from its fair value. 4. False. Depreciation applies to three classes of plant assets: land improvements, buildings, and equipment. 5. False. Depreciation does not apply to land because its usefulness and revenue-producing ability generally remain intact over time. 6. True. 7. False. Recognizing depreciation on an asset does not result in an accumulation of cash for replacement of the asset. 8. True. 9. False. Depreciation expense is reported on the income statement, and accumulated depreciation is reported as a deduction from plant assets on the balance sheet. 10. False. Three factors affect the computation of depreciation: cost, useful life, and salvage value (also called residual value). EXERCISE 10-7 (a) (1)

2017: ($34,000 – $2,000)/8 = $4,000 2018: ($34,000 – $2,000)/8 = $4,000

(2)

($34,000 – $2,000)/100,000 = $0.32 per mile 2017: 15,000 X $0.32 = $4,800 2018: 12,000 X $0.32 = $3,840

(3)

2017: $34,000 X 25% = $8,500 2018: ($34,000 – $8,500) X 25% = $6,375

(b) (1) (2)

Depreciation Expense.............................................. Accumulated Depreciation—Equipment.............. Equipment................................................................. Less: Accumulated Depreciation—Equipment.....

4,000 4,000 $34,000 4,000 $30,000...