Reference no: EM131829064
Question: Alysha Monet 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 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 accumulated depreciation 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. Three factors affect the computation of depreciation: cost, useful life, and salvage value.
Instructions: Identify each statement as true or false. If false, indicate how to correct the statement.
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Explain the application of the historical cost principle
: The following expenditures relating to plant assets were made by Glenn Company during the first 2 months of 2017.
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Indicate to which account adama would debit each of the cost
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Determine the amount to be reported as the cost of the land
: On March 1, 2017, Boyd Company acquired real estate, on which it planned to construct a small office building, by paying $80,000 in cash.
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Compute the total issue price of the bonds
: On January 1, 2012 Haley Co. issued ten year bonds with a face amount of $3,000,000, Compute the total issue price of the bonds
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Indicate how to correct the statement
: Recognizing depreciation on an asset results in an accumulation of cash for replacement of the asset. 8. The balance in accumulated depreciation represents.
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Compute depreciation expense under the straight-line method
: Compute the depreciation expense under the straight-line method for 2017 and 2018, assuming a December 31 year-end.
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Prepare the entry to record depreciation on the building
: Victor Mineli, the new controller of Santorini Company, has reviewed the expected useful lives and salvage values of selected depreciable assets.
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Journalize all entries required on the given dates
: Journalize all entries required on the above dates, including entries to update depreciation on assets disposed of, where applicable.
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How is gain or a loss on the sale of a plant asset computed
: In the fourth year of an asset's 5-year useful life, the company decides that the asset will have a 6-year service life.
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