True/False
Indicate whether the
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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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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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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8.
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Estimated total depreciation expense is calculated as original cost less
estimated salvage value.
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9.
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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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10.
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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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11.
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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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12.
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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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13.
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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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14.
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To record depreciation expense for a fiscal period, the accumulated depreciation
account is debited.
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15.
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Land and anything attached to the land are known as personal property.
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16.
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The straight-line method of depreciation results in a different amount of
depreciation expense each year.
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17.
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The declining-balance method of depreciation results in a different amount of
depreciation expense each year.
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18.
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Depreciation expense should be calculated for land just like any other plant
asset.
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19.
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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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20.
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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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21.
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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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22.
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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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23.
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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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24.
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Personal property includes buildings but not land.
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25.
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Gain on plant assets is revenue that results when a plant asset is sold for more
than book value.
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Multiple Choice
Identify the
choice that best completes the statement or answers the question.
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26.
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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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27.
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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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28.
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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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29.
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Expensing the cost of a plant asset over the plant asset's useful life 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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30.
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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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31.
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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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32.
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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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33.
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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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34.
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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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35.
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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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36.
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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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37.
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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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38.
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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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39.
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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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40.
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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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41.
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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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42.
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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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43.
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The journal entry to record the payment of property tax is ____.
a. | debit Cash; credit Taxes Expense | b. | debit Taxes Expense; credit
Cash | c. | debit Cash; credit Property Tax Expense | d. | debit Property Tax
Expense; credit Cash |
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44.
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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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45.
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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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46.
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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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47.
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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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48.
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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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49.
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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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50.
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The double-declining balance method of depreciation ____.
a. | records a greater depreciation expense in the early years of an asset's useful
life | b. | records a lesser depreciation expense in the early years of an asset's useful
life | c. | slows down the recording of depreciation in the early years of an asset's useful
life | d. | accelerates the recording of depreciation in the later years of an asset's
useful life |
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