ACCCOB2_6_PPE & Natural Resources

Property, plant, and equipment and natural resources are tangible long-term assets.

• T

• F

The relative fair values are used to determine the valuation of individual assets acquired in a lump-sum purchase.

• T

• F

Depreciation is a means of valuation, not cost allocation.

• T

• F

Depreciation, depletion, and amortization all involve the allocation of the cost of a long-lived asset to expense.

• T

• F

The cost of an asset less its residual value is its carrying amount.

• T

• F

The major objection to the straight-line method is that it assumes the asset’s economic usefulness and repair expense are the same each year which is not necessarily the case.

• T

• F

Use of the double-declining balance method and sum of the years’ digit method results in an increasing charge to depreciation expense that is why they are called accelerated methods.

• T

• F

Which of the following is true of depreciation accounting.

• It is cost allocation.

• It is part of the matching of revenues and expenses.

• It is not a matter of valuation.

• All of the choices are true.

Which of the following principles best describes the conceptual rationale for the methods of matching depreciation expense with revenues?

• Associating cause and effect

• Systematic and rational allocation

• Immediate recognition

• Partial recognition

Which of the following most accurately reflects the concept of depreciation as used in accounting?

• The process of charging the decline in value of an economic resource to income in the period in which the benefit occurred.

• The process of allocating the cost of tangible assets to expense in a systematic and

  rational manner to those periods expected to benefit from the use of the asset.

• A method of allocating asset cost to an expense account in a manner which closely matches the physical deterioration of the tangible asset involved.

• An accounting concept that allocates the portion of an asset used up during the year to

  the contra asset account for the purpose of properly recording the fair market value of

  tangible assets.