1
Q
- p. 82. DEPRECIATION.
Fixed assets are not for sale, they are used in operating the business. Their cost cannot be expensed in one year because:
A
they last a long time. Their cost is spread over their useful life by deducting a part of it each year as DEPRECIATION expense.
2
Q
- To determine the value of a piece of equipment at any time in its life, what accounts are needed?
A
- DEPRECIATION EXPENSE (becomes a part of OPERATING EXPENSES).
- ACCUMULATED DEPRECIATION (Contra Asset account charged against assets).
3
Q
- What is the entry for DEPRECIATION EXPENSE?
A
Dep Exp……1000
Accum Dep…1000
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4
Q
- Any REDUCTION to an asset is considered:
A
AN EXPENSE. However, no MOVEMENT OF CASH or writing a check is required for DEPRECIATION EXPENSE.
5
Q
- The DEPRECIATION EXPENSE amounts are TRANSFERRED from:
A
DEPRECIATION SCHEDULES on which the calculations are made.
6
Q
- If an asset is purchased during the first half of the month, how much depreciation is taken for the month?
A
a WHOLE MONTH’S depreciation.
7
Q
- If an asset is purchased during the second half of the month, how much depreciation is taken that month?
A
NONE for that month.
8
Q
- What is BOOK VALUE and how is it determined?
A
BOOK VALUE is the CURRENT DEPRECIATED VALUE of the asset, and it is determined by subtracting its ACCUMULATED DEPRECIATION from its COST.
9
Q
- A truck is purchased for 25k, and with ACCUMULATED DEPRECIATION of 5k, it would appear on the PLANT ASSETS section of the Balance Sheet as:
A
PLANT ASSETS
Truck…………….…25k
Less Accum Dep….5k
TOT PLNT ASSTS……….20k
10
Q
- What is the entry for land DEPRECIATION?
A
LAND IS NOT DEPRECIATED.
