QUESTION 1

Accumulated depreciation is represented by a reserve of cash intended for the replacement of the plant asset.

True

False

2 points

QUESTION 2

A depreciable asset is reported on the balance sheet at:

	A.	original cost less current year depreciation.
	B.	original cost less accumulated depreciation.
	C.	original cost adjusted for current market value.
	D.	book value adjusted for replacement cost differential.

2 points

QUESTION 3

When land and buildings are purchased together, the total cost of the purchase should be divided between the two types of plant assets based on their respective appraised values.

True

False

2 points

QUESTION 4

The costs of land and land improvements should be recorded in the same account.

True

False

2 points

QUESTION 5

The basis of valuation or measurement of plant assets is called historical cost.

True

False

2 points

QUESTION 6

Depreciation accounting could best be defined as:

	A.	a systematic cost allocation process.
	B.	the recognition of a cash expense.
	C.	the process of building up a fund of cash to replace plant assets.
	D.	All of the above answers are correct.

2 points

QUESTION 7

If depreciation is basically a function of the length of time that an asset is owned, it should be recorded using the:

	A.	sum-of-the-years'-digits method.
	B.	units-of-output method.
	C.	straight-line method.
	D.	double-declining-balance method.

2 points

QUESTION 8

The decline in service potential of a plant asset caused by inventions and technology is termed:

	A.	obsolescence.
	B.	inadequacy.
	C.	deterioration.
	D.	redundancy.

2 points

QUESTION 9

The difference between "tangible" assets and "intangible" assets is primarily one of size and value.

True

False

2 points

QUESTION 10

Under the straight-line method of depreciation, the annual depreciation charge is a constant amount.

True

False