2. Choose the correct answer “True” or “False” Depreciation

1.

Depreciation Expense shown on a company's income statement must be the same amount as the depreciation expense on the company's income tax return.

True

False

2.

The purpose of depreciation is to have the balance sheet report the current value of an asset.

True

False

3.

Depreciation Expense reflects an allocation of an asset's original cost rather than an allocation based on the economic value that is being consumed.

True

False

4.

An asset's useful life is the same as its physical life?

True

False

5.

One company might depreciate a new computer over three years while another company might depreciate the same model computer over five years...and both companies are right.

True

False

6.

Depreciation Expense is shown on the income statement in order to achieve accounting's matching principle.

True

False

7.

Accumulated Depreciation will appear as a deduction within the section of the balance sheet labeled as Property, Plant and Equipment.

True

False

8.

If a company continues to use equipment past the useful life that was assumed in determining the depreciation, there will be no Depreciation Expense in those additional years.

True

False

9.

A company may depreciate equipment over 10 years on a straight-line basis for its financial statements, but might use an accelerated method of depreciation over a shorter time period on its income tax return?

True

False

10.

Depreciation Expense is sometimes referred to as a noncash expense.

True

False

11.

Both Land and Land Improvements will generally be depreciated.

True

False

12.

Amortization of intangible assets and depletion of natural resources is conceptually similar to depreciation of constructed assets.

True

False

13.

Depreciation Expense shown on the financial statements is a precise amount that is continuously refined.

True

False

14.

Over the life of an asset subject to depreciation, the accelerated method will result in more Depreciation Expense in total than the total Depreciation Expense using the straight-line method.

True

False

15.

When a company purchases a 10-acre parcel of land and a building located on the land, the company will depreciate the entire cost over the useful life of the building.

True

False

16.

The book value of an asset indicates the asset's fair market value at that time.

True

False

17.

If a company revises the estimated useful life of one of its assets being depreciated, the company will need to reissue its earlier financial statements as the earlier depreciation was incorrect.

True

False