Understand depreciation concepts. 2) 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 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. 9. Depreciation expense and accumulated depreciation are reported on the income statement. 10. Four factors affect the computation of depreciation: cost, useful life, salvage value, and residual

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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E10.4

### Understanding Depreciation Concepts

**E10.4 (LO 2)** 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 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.
9. Depreciation expense and accumulated depreciation are reported on the income statement.
10. Four factors affect the computation of depreciation: cost, useful life, salvage value, and residual value.

### Instructions

Identify each statement as true or false. If false, indicate how to correct the statement.
Transcribed Image Text:### Understanding Depreciation Concepts **E10.4 (LO 2)** 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 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. 9. Depreciation expense and accumulated depreciation are reported on the income statement. 10. Four factors affect the computation of depreciation: cost, useful life, salvage value, and residual value. ### Instructions Identify each statement as true or false. If false, indicate how to correct the statement.
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Understand depreciation concepts.
E10.4 (LO 2) 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 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.
9. Depreciation expense and accumulated depreciation are reported on the income statement.
10. Four factors affect the computation of depreciation: cost, useful life, salvage value, and residual
value.
Instructions
Identify each statement as true or false. If false, indicate how to correct the statement.
Transcribed Image Text:Understand depreciation concepts. E10.4 (LO 2) 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 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. 9. Depreciation expense and accumulated depreciation are reported on the income statement. 10. Four factors affect the computation of depreciation: cost, useful life, salvage value, and residual value. Instructions Identify each statement as true or false. If false, indicate how to correct the statement.
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