PROBLEMI

TRUE OR FALSE

The acquisition costs of property, plant, and equipment should include all normal,

reasonable and necessary cost to get the asset in place and ready for use.

a$.$ True

b$.$ False

When land is purchased to construct a new building, the cost of removing any

structures on the land should be charged to the building account.

a$.$ True

b$.$ False

Land acquired as a speculation is reported under Investments on the balance sheet.

a$.$ True

b$.$ False

Standby equipment held for use in the event of a breakdown of regular equipment is

reported as property, plant, and equipment.

a$.$ True

b$.$ False

The cost of repairing damage to a machine during installation is debited to a fixed

asset account.

a$.$ True

b$.$ False

During construction of a building, the cost of interest on a construction loan should

be charged to an expense account.

a$.$ True

b$.$ False

As a company depreciates a piece of equipment, it's cash flow goes up$.$

a$.$ True

b$.$ False

When cities give land or buildings to a company to locate in the community, no

entry is made since there is no cost to the company.

a$.$ True

b$.$ False

The depreciable cost of a building is the same as its acquisition cost.

a$.$ True

b$.$ False

It is not necessary for a company to use the same depreciation method for financial

statements and for determining income taxes.

a$.$ True

b$.$ False

An estimate of the amount which an asset can be sold at the end of its useful life is

called residual value

a$.$ True

b$.$ False

The amount of depreciation expense for the first full year of a fixed asset costing

$$95,000,$ with and estimated residual value of $$5,000$ and a useful life of $5$ years, is

$$19,000$ by straight$-$line method.

a$.$ True

b$.$ False

The amount of depreciation expense for a fixed asset costing $$95,000,$ with and

estimated residual value of $$5,000$ an a useful life of $5$ years or $20,000$ operating

hours, is $$21,375$ by units$-$of$-$production method during a period when asset was used

for $4,500$ hours.

a$.$ True

b$.$ False

For income tax purposes most companies use an accelerated depreciation method

called double decline balance.

a$.$ True

b$.$ False

Capital expenditures are costs of acquiring, constructing, adding, or replacing

property, plant and equipment.

a$.$ True

b$.$ False