Financial Accounting, 8th Edition
8th Edition
ISBN: 9780078025556
Author: Robert Libby, Patricia Libby, Daniel Short
Publisher: McGraw-Hill Education
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Textbook Question
Chapter 4, Problem 7MCQ
JJ Company owns a building. Which of the following statements regarding
- a. As depreciation is recorded, stockholders’ equity is reduced.
- b. Depreciation is an estimated expense to be recorded over the building’s estimated useful life.
- c. As depreciation is recorded, the net book value of the asset is reduced.
- d. As the value of the building decreases over time, it ’’depreciates.’’
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Which 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.
Which 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.
Place 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…
Chapter 4 Solutions
Financial Accounting, 8th Edition
Ch. 4 - What is the purpose of recording adjusting...Ch. 4 - List the four types of adjusting entries, and give...Ch. 4 - What is a contra-asset? Give an example of one.Ch. 4 - Explain how the financial statements relate to...Ch. 4 - What is the equation for each of the following...Ch. 4 - Explain the effect of adjusting entries on cash.Ch. 4 - How is earnings per share computed and...Ch. 4 - Prob. 8QCh. 4 - What are the purposes for closing the books?Ch. 4 - Differentiate among (a) permanent, (b) temporary,...
Ch. 4 - Explain why the income statement accounts are...Ch. 4 - Prob. 12QCh. 4 - Which of the following accounts would not appear...Ch. 4 - Which account is least likely to appear in an...Ch. 4 - Prob. 3MCQCh. 4 - Prob. 4MCQCh. 4 - Prob. 5MCQCh. 4 - An adjusted trial balance a. Shows the ending...Ch. 4 - JJ Company owns a building. Which of the following...Ch. 4 - Prob. 8MCQCh. 4 - Prob. 9MCQCh. 4 - If a company is successful in acquiring several...Ch. 4 - Prob. 1MECh. 4 - Matching Definitions with Terms Match each...Ch. 4 - Matching Definitions with Terms Match each...Ch. 4 - Prob. 4MECh. 4 - Prob. 5MECh. 4 - Prob. 6MECh. 4 - Prob. 7MECh. 4 - Prob. 8MECh. 4 - Prob. 9MECh. 4 - Prob. 10MECh. 4 - Prob. 11MECh. 4 - Prob. 12MECh. 4 - Prob. 1ECh. 4 - Prob. 2ECh. 4 - Prob. 3ECh. 4 - Prob. 4ECh. 4 - Prob. 5ECh. 4 - Prob. 6ECh. 4 - Prob. 7ECh. 4 - Prob. 8ECh. 4 - Prob. 9ECh. 4 - Recording Transactions Including Adjusting and...Ch. 4 - Prob. 11ECh. 4 - Prob. 12ECh. 4 - Inferring Transactions Deere Company is the...Ch. 4 - Analyzing the Effects of Errors on Financial...Ch. 4 - Prob. 15ECh. 4 - Prob. 16ECh. 4 - Prob. 17ECh. 4 - Prob. 18ECh. 4 - Prob. 19ECh. 4 - Prob. 20ECh. 4 - Prob. 1PCh. 4 - Prob. 2PCh. 4 - Prob. 3PCh. 4 - Prob. 4PCh. 4 - Prob. 5PCh. 4 - Prob. 6PCh. 4 - Prob. 7PCh. 4 - Prob. 1APCh. 4 - Prob. 2APCh. 4 - Prob. 3APCh. 4 - Prob. 4APCh. 4 - Prob. 5APCh. 4 - Prob. 6APCh. 4 - Prob. 7APCh. 4 - Prob. 1COMPCh. 4 - Prob. 2COMPCh. 4 - Prob. 1CPCh. 4 - Prob. 2CPCh. 4 - Prob. 3CPCh. 4 - Prob. 4CPCh. 4 - Prob. 5CPCh. 4 - Prob. 6CPCh. 4 - Prob. 7CPCh. 4 - Prob. 8CPCh. 4 - Prob. 9CPCh. 4 - Prob. 1CC
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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
- which of the following statements is not correct? 1) generally accepted accounting principles require that the original cost of a long-term asset continue to appear in the asset account until the disposition of the asset. 2)The book value of a long-term asset is reduced each year as depreciation is recorded Building and trucks are examples of long -term assets 3)Salvage value is computed by subtracting the accumulated depreciation from the cost of a long-term asset.arrow_forwardWhen the estimate of an asset's useful life is changed, select the false statement a. depreciation expense for all past periods must be recalculated. b. there is a change in the amount of depreciation expense recorded for future years. c. only the depreciation expense in the remaining years is changed. d. None of the above is truearrow_forwardSometimes, for the fixed assets of certain businesses, the balance in Accumulated Depreciation is equal to the cost of the asset. a. Can one record additional depreciation on the assets if the assets are still useful to the business? b. Why? Explain: c. Also, when can such a business make an entry to remove the cost and accumulated depreciation of the fixed assets from the account?arrow_forward
- Company A has owned a building for several years. Whichof the following statements regarding depreciation is falsefrom an accounting perspective?a. Depreciation Expense for the year will equalAccumulated Depreciation.b. Depreciation is an estimated expense to be recordedeach period during the building’s life.c. As depreciation is recorded, stockholders’ equity isreduced.d. As depreciation is recorded, total assets are reducedarrow_forwardWhen a business uses the straight-line method of depreciation, the amount of depreciation is reduced from year to year. Why is this wrong.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
- Which of the following would have an effect on the presentation of past years' comparable financial statements? Select one: O a. A component operation of the company is discontinued O b. Revising the estimated life of equipment Oc Correcting an error due to improper revenue recognition O d. Impairment of Goodwill Oe. Using MACRS to compute the depreciation of an asset for tax purposesarrow_forwardA company fails to capitalize avoidable interest incurred while constructing an asset. What is the effect on net income in the current year and net income in subsequent years (when the asset is depreciated).arrow_forwardWhich of the following would NOT be reflected in the income statement? Group of answer choices A.Correction of an error in previously issued financial statements B.Loss on disposal of a segment of a business C.Cumulative effect of a change in depreciation methods D.An extraordinary itemarrow_forward
- The Accountant for the a Company forgot to make an adjusting entry to record depreciation for the current year. The effect of this error would be: a An overstatement of net income and an understatement of assets. b An overstatement of assets offset by an understatement of owners' equity. c An overstatement of assets, net income, and owners' equity. d An overstatement of assets and of net income and an understatement of owners' equity.arrow_forward30) A loss on disposal of an asset would be reported: A) as a direct increase to the asset account on the balance sheet. B) in the Operating Expenses section of the income statement. C) as a direct decrease to the asset account on the balance sheet. D) in the Operating Revenues section of the income statement.arrow_forward7. Indicate which of the following losses or expenses would be included in calculating a net operating loss by placing a check mark on the appropriate line. A. A short-term capital loss that resulted from selling stock B. Net business loss from a sole proprietorship C. A casualty loss involving a personal residence that resulted from a Presidentially declared disaster D. Loss from selling 1244 stock E. Deductible contributions made to a traditional IRA account F. Loss in selling business equipment G. Charitable donations claimed as itemized deductions 8. If a net operating loss is carried forward to a future return, the deduction would be allowed only as a deduction from AGI (an itemized deduction). True Falsearrow_forward
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