onnect/hmEBook do?setTab-sectionTabs 13 go book contents search ebook ge 5. If a capital expenditure is erroneously treated as a revenue expenditure, will the net income of the current year be overstated or understated? Will this error have any effect on the net income reported in future years? Explain. 6. Shoppers' Market purchased for $265,000 a site on which it planned to build a new store. The site consisted of three acres of land and included an old house and two barns. County property tax records showed the following appraised values for this property: land, $160,000; buildings $40,000. Indicate what Shoppers' should do with this $265,000 cost in its financial statements and explain your reasoning 7. Should depreciation continue to be recorded on a building when ample evidence exists that the current market value is greater than original cost and that the rising trend of market values is continuing? Explain. 8. Explain what is meant by an accelerated depreciation method. Are accelerated methods more widely used in financial statements or in income tax returns? Explain. 9. One accelerated depreciation method is called fixed-percentage-of-declining-balance. Explain what is meant by the terms "fixed-percentage" and declining-balance. For what purpose is this method most widely used? 10. Evaluate the following quotation: "We shall have no difficulty in paying for new plant assets needed during the coming year because our estimated outlays for new equipment amount to only $80,000, and we have more than twice that amount in our accumulated depreciation account at present. 11. Explain two approaches to computing depreciation for a fractional period in the year in which an set is purchased. (Neither of vou roaches should require the computation of d