A company will account for some events for long-term assets that are less routine than recording purchase and depreciation or amortisation. For example, a company may realise that its original estimate of useful life or salvage value is no longer accurate. A long- term asset may lose its value, or a company may sell a long-term asset. Required: Analyse and state whether the statement below are true or false. 1. Long-term assets are recorded at cost less all expenditures necessary to get the asset ready for use. 2. Cash received from the sale of salvaged materials increases the total cost of land. 3. Repairs and maintenance expenditures are capitalized because they maintain a given level of benefits. 4. Declining-balance depreciation will be lower than straight-line depreciation in earlier years, but higher in later years. 5. The cost of natural resources is allocated to expense through a process known as depletion. 6. Intangible assets with an indefinite useful life (goodwill and most trademarks) are not amortized. 7. Depreciation in accounting records the decrease in value of an asset. 8. A gain is recorded if an asset is sold for less than book value. 9. When a change in estimate is required, the company changes depreciation in prior, current and future years. 10. Cash received from the sale of salvaged materials increases the total cost of land.
A company will account for some events for long-term assets that are less routine than recording purchase and depreciation or amortisation. For example, a company may realise that its original estimate of useful life or salvage value is no longer accurate. A long- term asset may lose its value, or a company may sell a long-term asset. Required: Analyse and state whether the statement below are true or false. 1. Long-term assets are recorded at cost less all expenditures necessary to get the asset ready for use. 2. Cash received from the sale of salvaged materials increases the total cost of land. 3. Repairs and maintenance expenditures are capitalized because they maintain a given level of benefits. 4. Declining-balance depreciation will be lower than straight-line depreciation in earlier years, but higher in later years. 5. The cost of natural resources is allocated to expense through a process known as depletion. 6. Intangible assets with an indefinite useful life (goodwill and most trademarks) are not amortized. 7. Depreciation in accounting records the decrease in value of an asset. 8. A gain is recorded if an asset is sold for less than book value. 9. When a change in estimate is required, the company changes depreciation in prior, current and future years. 10. Cash received from the sale of salvaged materials increases the total cost of land.
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter7: Operating Assets
Section: Chapter Questions
Problem 12MCQ: Which of the following statements is true? a. The fixed asset turnover ratio assists managers in...
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Transcribed Image Text:A company will account for some events for long-term assets that are less routine than recording purchase and depreciation or
amortisation. For example, a company may realise that its original estimate of useful life or salvage value is no longer accurate. A long-
term asset may lose its value, or a company may sell a long-term asset.
Required:
Analyse and state whether the statement below are true or false.
1. Long-term assets are recorded at cost less all expenditures necessary to get the asset ready for use.
2. Cash received from the sale of salvaged materials increases the total cost of land.
3. Repairs and maintenance expenditures are capitalized because they maintain a given level of benefits.
4. Declining-balance depreciation will be lower than straight-line depreciation in earlier years, but higher in later years.
5. The cost of natural resources is allocated to expense through a process known as depletion.
6. Intangible assets with an indefinite useful life (goodwill and most trademarks) are not amortized.
7. Depreciation in accounting records the decrease in value of an asset.
8. A gain is recorded if an asset is sold for less than book value.
9. When a change in estimate is required, the company changes depreciation in prior, current and future years.
10. Cash received from the sale of salvaged materials increases the total cost of land.
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