Name: 
 

Chpt 21 Study Guide


True/False
Indicate whether the sentence or statement is true or false.
 

 1. 
Cash is a plant asset.
 

 2. 
Assets expected to be exchanged for cash or consumed within a year are known as plant assets.
 

 3. 
The three major types of plant assets are equipment, buildings, and merchandise inventory.
 

 4. 
Recording a plant asset for the amount paid for the asset is an application of the Matching Expenses with Revenue concept.
 

 5. 
A plant asset account has a normal debit balance.
 

 6. 
Plant assets decrease in value because of use and the passage of time.
 

 7. 
Allocating a plant asset's cost to an expense over the plant asset's useful life is an application of the Matching Expenses with Revenue concept.
 

 8. 
A factor that affects the useful life of a plant asset is functional depreciation.
 

 9. 
A factor that affects the useful life of a plant asset is the asset's cost.
 

 10. 
Two of the factors that affect the amount of depreciation expense for a plant asset are the estimated salvage value and estimated useful life of the plant asset.
 

 11. 
The original cost of a plant asset includes only the amount paid the vendor for the plant asset.
 

 12. 
Estimated salvage value of a plant asset is determined when the plant asset is sold.
 

 13. 
The exact length of useful life of a plant asset can be accurately predicted.
 

 14. 
Estimated total depreciation expense is calculated as original cost less estimated salvage value.
 

 15. 
Charging an equal amount of depreciation expense for a plant asset in each year of useful life is the straight-line method of depreciation.
 

 16. 
An accounting form on which a business records information about each plant asset is a plant asset record.
 

 17. 
As depreciation expense is recorded for a plant asset, the original cost of the asset is decreased in the account.
 

 18. 
The original cost of a plant asset minus accumulated depreciation is known as the book value of a plant asset.
 

 19. 
When a plant asset's book value equals its estimated salvage value, no further depreciation expense is recorded.
 

 20. 
To record depreciation expense for a fiscal period, the accumulated depreciation account is debited.
 

 21. 
Land and anything attached to the land are known as personal property.
 

 22. 
The straight-line method of depreciation results in a different amount of depreciation expense each year.
 

 23. 
The declining-balance method of depreciation results in a different amount of depreciation expense each year.
 

 24. 
Depreciation expense should be calculated for land just like any other plant asset.
 

 25. 
When plant assets are bought, the journal entry is similar to recording the buying of current assets such as supplies.
 

 26. 
The portion of a plant asset's cost that is transferred to an expense account in each fiscal period during a plant asset's useful life is accumulated depreciation.
 

 27. 
Assessed value is the value of an asset determined by tax authorities for the purpose of calculating taxes.
 

 28. 
Revenue that results when a plant asset is sold for more than book value is known as loss on plant assets.
 

 29. 
Declining-balance depreciation is calculated by multiplying the book value by a constant depreciation rate at the end of each fiscal period.
 

 30. 
Personal property includes buildings but not land.
 

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
 

 31. 
Some examples of current assets are ____.
a.
cash, accounts receivable, and cash register
b.
cash, accounts receivable, and merchandise inventory
c.
cash, merchandise inventory, and furniture
d.
none of the above
 

 32. 
Some examples of plant assets are ____.
a.
prepaid insurance, computers, and supplies
b.
cash, supplies, and furniture
c.
computers, cash registers, and display cases
d.
none of the above
 

 33. 
Cash and other assets expected to be exchanged for cash or consumed within a year are ____.
a.
plant assets
c.
both a and b
b.
current assets
d.
none of the above
 

 34. 
The telephones a company buys and resells to its customers are included in the general ledger account ____.
a.
Merchandise Inventory
c.
Equipment
b.
Supplies
d.
Accounts Payable
 

 35. 
Recording a plant asset at cost is an application of the accounting concept ____.
a.
Objective Evidence
c.
Matching Expenses with Revenue
b.
Going Concern
d.
Historical Cost
 

 36. 
Transferring a portion of a plant asset's cost to an expense in each fiscal period that a plant asset is used to earn revenue is an application of the accounting concept ____.
a.
Matching Expenses with Revenue
c.
Objective Evidence
b.
Going Concern
d.
Historical Cost
 

 37. 
The purpose of recording depreciation is to ____.
a.
earn revenue
b.
recover the cash spent on plant assets
c.
record an expense in the periods in which the asset is used to earn revenue
d.
earn money to replace the asset
 

 38. 
The useful life of a plant asset is estimated based on ____.
a.
prior experience with similar assets
c.
IRS guidelines
b.
guidelines published by trade associations
d.
all of the above
 

 39. 
The portion of a plant asset's cost transferred to an expense account in each fiscal period during a plant asset's useful life is ____.
a.
accumulated depreciation
c.
current assets
b.
gain on plant assets
d.
depreciation expense
 

 40. 
The original cost of a plant asset includes the ____.
a.
cost of power to run the equipment
c.
installation costs
b.
disposal costs
d.
interest cost
 

 41. 
Generally, a business removes a plant asset from use and disposes of it ____.
a.
when a profit can be made on the disposal
b.
when the asset is no longer usable
c.
when the asset is three years old
d.
at the end of each fiscal year
 

 42. 
The total depreciation expense for a fax machine purchased for $700.00 with an estimated salvage value of $100.00 is ____.
a.
$800.00
c.
$600.00
b.
$700.00
d.
$100.00
 

 43. 
The annual depreciation expense for a fax machine