Q1. The amount originally paid (acquisition cost) to purchase the equipment was _________, which was capitalized and recorded as a(n) (_____________ / expense).
Q2. The portion of the equipment's original cost expensed since it was purchased is _________. The cost allocated to Year 5 for use of the equipment is _________. Assuming straight-line depreciation is used, it appears the equipment was purchased ___ years ago.
Q3. Depreciation expense is a(n) (_________/ known) amount recorded (_________/ during) each accounting period as an adjustment, which is an application of the (cost / _________/ consistency) principle. On a multi-step income statement, depreciation expense is reported as an (_________/ non-operating revenues and expenses).
Q4. The (straight-line / _________/ neither) method(s) of depreciation will result in greater depreciation the first year of an asset’s useful life and the (straight-line / double-declining-balance / _________) method(s) will result in greater total depreciation over the asset’s useful life.
Q5. Book value (is / is not) the same as current value. The primary purpose of depreciation is (_________/ current valuation). Explain what this means.
Q6. During the year, equipment was sold for _________more than (acquisition cost / _________/ market value) while land was sold for _________less than (_________/ market value). The company got a better deal on the sale of the (equipment / land / _________). Explain.
Q7. As a result of the financial statement information above, _________ will be added into total assets and Year 5 net income will (increase / _________) by _________.
Q8. By purchasing additional property, plant, and equipment, the company is investing in (short-term / _________) income-producing assets that are expected to (_________/ decrease) future revenues.