True/False
Indicate whether the sentence or statement is true
or false.
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1.
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Cash
is a plant asset.
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2.
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Assets expected to be exchanged for cash or consumed within a year are known as plant
assets.
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3.
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The
three major types of plant assets are equipment, buildings, and merchandise inventory.
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4.
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Recording a plant asset for the amount paid for the asset is an application of the
Matching Expenses with Revenue concept.
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5.
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A
plant asset account has a normal debit balance.
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6.
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Plant
assets decrease in value because of use and the passage of time.
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7.
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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.
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8.
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A
factor that affects the useful life of a plant asset is functional depreciation.
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9.
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A
factor that affects the useful life of a plant asset is the asset's cost.
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10.
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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.
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11.
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The
original cost of a plant asset includes only the amount paid the vendor for the plant
asset.
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12.
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Estimated salvage value of a plant asset is determined when the plant asset is
sold.
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13.
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The
exact length of useful life of a plant asset can be accurately predicted.
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14.
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Estimated total depreciation expense is calculated as original cost less estimated
salvage value.
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15.
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Charging an equal amount of depreciation expense for a plant asset in each year of
useful life is the straight-line method of depreciation.
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16.
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An
accounting form on which a business records information about each plant asset is a plant asset
record.
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17.
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As
depreciation expense is recorded for a plant asset, the original cost of the asset is decreased in
the account.
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18.
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The
original cost of a plant asset minus accumulated depreciation is known as the book value of a plant
asset.
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19.
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When
a plant asset's book value equals its estimated salvage value, no further depreciation expense is
recorded.
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20.
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To
record depreciation expense for a fiscal period, the accumulated depreciation account is
debited.
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21.
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Land
and anything attached to the land are known as personal property.
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22.
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The
straight-line method of depreciation results in a different amount of depreciation expense each
year.
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23.
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The
declining-balance method of depreciation results in a different amount of depreciation expense each
year.
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24.
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Depreciation expense should be calculated for land just like any other plant
asset.
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25.
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When
plant assets are bought, the journal entry is similar to recording the buying of current assets such
as supplies.
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26.
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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.
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27.
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Assessed value is the value of an asset determined by tax authorities for the purpose
of calculating taxes.
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28.
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Revenue that results when a plant asset is sold for more than book value is known as
loss on plant assets.
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29.
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Declining-balance depreciation is calculated by multiplying the book value by a
constant depreciation rate at the end of each fiscal period.
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30.
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Personal property includes buildings but not land.
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Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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31.
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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 | | |
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32.
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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 | | |
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33.
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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 | | | | |
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34.
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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 | | | | |
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35.
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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 | | | | |
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36.
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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 | | | | |
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37.
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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 | | |
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38.
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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 | | | | |
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39.
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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 | | | | |
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40.
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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 | | | | |
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41.
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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 | | |
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42.
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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 | | | | |
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43.
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The
annual depreciation expense for a fax machine purchased for $700.00 with an estimated salvage value
of $100.00 and a useful life of five years is ____. a. | $100.00 | c. | $140.00 | b. | $120.00 | d. | $160.00 | | | | |
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44.
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The
monthly depreciation expense for a fax machine purchased for $700.00 with an estimated salvage value
of $100.00 and a useful life of five years is ____. a. | $100.00 | c. | $50.00 | b. | $75.00 | d. | $10.00 | | | | |
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45.
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Book
value of a plant asset is original cost ____. a. | plus accumulated depreciation | c. | plus salvage value | b. | minus
accumulated depreciation | d. | minus salvage
value | | | | |
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46.
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Three
general ledger accounts used to record information about each kind of plant asset are
____. a. | a contra asset
account, liability account, and expense account | b. | an asset
account, contra asset account, and expense account | c. | an asset
account, contra asset account, and liability account | d. | none of the
above | | |
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47.
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The
journal entry to record the adjustment for office equipment depreciation is debit Depreciation
Expense-Office Equipment and credit ____. a. | Office Equipment | b. | Accumulated
Depreciation-Office Equipment | c. | Cash | d. | none of the above | | |
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48.
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When
a plant asset is disposed of, a journal entry is recorded that ____. a. | recognizes the
annual depreciation | b. | removes the amount owed on the plant asset from Accounts
Payable | c. | closes the depreciation expense account to Income
Summary | d. | removes the original cost of the plant asset and its related
accumulated depreciation | | |
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49.
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The
journal entry to record the sale of office equipment for book value is debit Cash and
____. a. | credit Office
Equipment | b. | debit Accumulated Depreciation-Office Equipment; credit Office
Equipment | c. | debit Office Equipment; credit Accumulated Depreciation-Office
Equipment | d. | none of the above | | |
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50.
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If a
plant asset costs $1,200.00, has accumulated depreciation of $1,000.00, and is sold for $200.00, the
gain or loss on disposal is ____. a. | $200.00 gain | c. | no gain or loss | b. | $200.00
loss | d. | $1,000.00
loss | | | | |
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51.
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The
journal entry to record the sale of office equipment for more than the book value is debit Cash and
____. a. | credit Office
Equipment | b. | debit Accumulated Depreciation-Office Equipment; credit Office
Equipment and Gain on Plant Assets | c. | debit Office Equipment; credit Accumulated Depreciation-Office
Equipment and Gain on Plant Assets | d. | none of the above | | |
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52.
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If a
plant asset costs $4,000.00, has accumulated depreciation of $3,200.00, and is sold for $900.00, the
gain or loss on disposal is ____. a. | $900.00 gain | c. | $100.00 loss | b. | $800.00
loss | d. | $100.00
gain | | | | |
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53.
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If a
plant asset costs $700.00, has accumulated depreciation of $550.00, and is sold for $100.00, the gain
or loss on disposal is ____. a. | $50.00 loss | c. | $150.00 loss | b. | $100.00
gain | d. | $450.00
gain | | | | |
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54.
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The
journal entry to record the payment of property tax is ____. a. | debit Cash;
credit Taxes Expense | c. | debit Cash;
credit Property Tax Expense | b. | debit Taxes Expense; credit
Cash | d. | debit Property
Tax Expense; credit Cash | | | | |
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55.
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The
amount by which a plant asset depreciates is classified as ____. a. | revenue | c. | an
expense | b. | a liability | d. | an asset | | | | |
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56.
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Depreciation expense for a plant asset is recorded ____. a. | when the asset
is bought | b. | after the asset is sold | c. | when the asset
is repaired | d. | at the end of each fiscal period during the asset's estimated
useful life | | |
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57.
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The
smallest unit of time used to calculate depreciation is ____. a. | one
month | c. | one
year | b. | half a
year | d. | none of the
above | | | | |
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58.
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The
accumulated depreciation account should show ____. a. | total
depreciation for plant assets since the business was formed | b. | total
depreciation for plant assets still in use | c. | only total depreciation expense for plant assets for the
current year | d. | next year's estimated depreciation for plant
assets | | |
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59.
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When
a plant asset is sold for more than the asset's book value, ____. a. | cash received
plus accumulated depreciation plus gain on disposal equals original cost plus gain on
disposal | b. | cash received plus accumulated depreciation equals original
cost plus gain on disposal | c. | cash received plus accumulated depreciation plus loss on
disposal equals original cost | d. | cash received plus accumulated depreciation equals original
cost plus loss on disposal | | |
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60.
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The
plant asset land is classified as real property and is ____. a. | depreciated
using the declining-balance method of depreciation | b. | depreciated
using the same method used for other plant assets | c. | depreciated
without considering estimated salvage value because of its permanent nature | d. | generally not
depreciated | | |
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