which of the following statements related to depreciation is true

B) Derecognition increases or decreases the … c. Accumulated depreciation represents a growing fund of cash. a. Services, Accumulated Depreciation: Definition & Formula, Working Scholars® Bringing Tuition-Free College to the Community. Each year the accountant adds an amount for depreciation when calculating the company's profit. ... Depreciation is allocated so as to change a fair proportion of the depreciable amount in each accounting period during the expected useful life of the asset. Depreciation is defined as the expensing of an asset involved in producing revenues throughout its useful life. False. Select one: a. All of THESE are true. Accounting: Depreciation, present value and ratios. c. Repurchase of own company share increases the cash flow to shareholders. All other trademarks and copyrights are the property of their respective owners. Depreciation is part of the matching of revenue and expense. b. Economic factors that shorten the useful life of an asset include, 10. C. All of the following statements concerning the alternative depreciation system (ADS) are true, except: a.ADS is used for assets used predominantly outside the U.S b. b. d. Accumulated depreciation is the portion of an asset's cost that has already been recorded as an expense. Depreciation is a process of valuation. d. Both total assets and total stockholders' equity decrease. Depreciation … 3. 1. It is not an appropriation of profit. Profit, or net income, is all of the company's revenues minus the cost of doing business, which can include expenses, interest, taxes and depreciation. Depreciation is found on the income statement, balance sheet, and cash flow statement. Hence statement B. is a true statement. The following is true of depreciation accounting. Multiple Choice. Create your account. All property, plant and equipment assets must be b. Depreciation can be a confusing concept for students because it is a non-cash account. Earnings before interest, depreciation and amortization (EBIDA) is a measure of the earnings of a company that adds the interest expense, depreciation, and amortization back to … b. Depreciation is necessary because the cost of use is accrued separately from when it is paid. © copyright 2003-2020 Study.com. Which statement is true in relation to depreciation a Depreciation is not a. a. In other words, depreciation applies the accruals concept to the capitalised cost of a non-current asset and matches this cost to the period that it relates to. Generally Accepted Accounting Principles, United States Environmental Protection Agency. a. Depreciation includes … Total assets decrease and total liabilities increase. The goal of depreciation is to match the expense related to equipment that was purchased in one year to all the years that it will provide value to the company. Which depreciation method is used to determine... On 1 July 2011 Sprintfast Couriers, which has a... 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When recording depreciation, which of the following statements is true? Sciences, Culinary Arts and Personal C. Depreciation provides for the proper matching of expenses with revenues. Which of the following statements related to depreciation is true? a. B. a. b. straight-line. Depreciation is a process of asset valuation, not cost allocation. The set of rules and regulations that govern the content and format of financial statements is called Government Acceptable Procedures (GAP). a. Depreciation . Recording deprecation on plant assets affects the c. In calculating depreciation expense both the cost of d. Depreciable amount is the cost of the asset less its depreciated. Which of the following statements regarding depreciation is true? This preview shows page 23 - 25 out of 98 pages. Which of the following statements is not true? a. Depreciation is a noncash expense, but it is important because it affects a corporation’s tax liability. 9. 4. 3. Depreciation is not a matter of valuation. Which of the following statements is true? c. Equipment with useful life that is not affected by the amount of use. Depreciation expense is reported on the income statement, however, accumulated depreciation is a contra asset account against property, plant and equipment on the balance sheet. 1. The annual depreciation charge measures the cash that the company has spent on maintaining and renewing its plant and equipment. The expenditures approach sums the compensation of employees, rents, profits, net interest, and non-income expenses for depreciation and indirect business taxes. Which of the following statements is true? d. Retirement of long term bonds increases the cash flow to bondholders. If a company uses double-declining-balance method for tax purposes, the company must also … B. Management makes the call on the following things: ... depreciation costs on the income statement will be significantly lower in the first years of the asset's life ... Related Articles. Equipment on which maintenance and repairs increase substantially with age. It will be greater than the interest payment and it will also increase from year to year ... For income statement purposes, depreciation is a variable expense if the depreciation method used is a. units-of-production. Bonus Depreciation: A bonus depreciation is a tax incentive that allows a business to immediately deduct a large percentage of the purchase price of eligible business assets. Its financial statements for the years ended 12/31/12 and 12/31/13 contained the following errors: 2012 2013 Ending inventory $23,000 overstatement $31,000 understatement Depreciation expense 19,000 understatement 11,000 overstatement Become a Study.com member to unlock this Depreciation is a noncash expense and reduces taxable income thereby reducing the cash outflow associated with tax payments. A. This process is referred to as 'depreciating assets'. Depreciation is part of the matching of revenue and expense. d. Accumulated … This Contra-account Is Subtracted When Determining Total Assets On The Balance Sheet. a. c. Total assets decrease and stockholders' equity increases. The time of the first acquisition posting to the asset sets the following fields in the master of asset … Course Hero is not sponsored or endorsed by any college or university. The higher the annual depreciation the higher the net present value of a project. b. b. Common in manufacturing, it’s calculated by dividing the equipment’s net cost by its expected lifetime production. c. d. Equipment used consistently every period. e. none of the above income statement only. Which of the following statements is true regarding depreciation as it related from ACC 200 at North Carolina State University b. Depreciation is not a matter of valuation. Which statement is true in relation to depreciation? So, analysts write off a portion of the equipment's value every year to match the revenues it brings in. It Is A Balance Sheet Account. The inclusion of intermediate goods and services in GDP calculations would underestimate our nation’s production level. e. Additions to net working capital decrease the cash flow of the firm Depreciation is provided as a charge against profits. A. Depreciation is a process by which a business sets aside cash to replace assets as needed. Depreciation must be calculated the same way for financial reporting and tax purposes. Which statement is the assumption on which straight line depreciation is based? b. The residual value of an asset depends on the depreciation method chosen. It Is An Income Statement Account. True False. Depreciation is defined in IAS 16 as being the systematic allocation of the depreciable amount of an asset over its useful life. because it is replacing equipment as the equipment depreciates. answer! The initial investment in net working capital is usually recuperated at the end of the project’s useful life. 1. 78. Accumulated depreciation holds the value of the portion of the assets value that has been depreciated, while, depreciation expense is just for one period or year. Question: Which Of The Following Statements About The Accumulated Depreciation Account Are True? Depreciation is a process of valuation. The answer is: d. Accumulated depreciation is the portion of an asset's cost that has already been recorded as an expense. True. An entity that is neither expanding nor contracting an. Which of the following statements is true? Since depreciation is an expense, it has a direct effect on the profit that appears on a company's income statement. 7. a. As a result, the statement of cash flows prepared under the indirect method will add depreciation expense to the amount of net income. Depreciation can be somewhat arbitrary which causes the value of … Depreciation for accounting purposes refers the allocation of the cost of assets to periods in which the assets are used (depreciation with the matching of revenues to expenses principle). Which of the following statements best describes the purpose of depreciation? b. a. Select one: a. 3. A) Derecognition requires that the firm remove the asset acquisition value from the balance sheet but not the related accumulated depreciation. In which of the following situations is the production method of depreciation most. Depreciation is a process by which a business sets aside cash to replace assets as needed. c. Depreciation retains funds by reducing income tax and dividend. Which of the following statements about depreciation is correct A. Both total assets and stockholders' equity increase. 9. The book value of a plant asset should approximate its market value. Which of the following statements about derecognition of an asset is true? The principal objection to the straight line method of depreciation is that it, 4. Units of production depreciation is a depreciation method that allows businesses to determine the value of an asset based upon usage. Which of the following statements is true with regard to depreciation expense? CheckedC. Depreciation is a process by which a business sets aside cash to replace assets as needed. Which of the following statements about depreciation is true? b. Depreciation’s impact upon cash flows can be accounted for by adding depreciation back to net income before interest and after taxes. c. Depreciation retains funds by reducing income tax and dividend. A company should use the depreciation method that best matches expense recognition with the use of the asset. Which of the following statements is true? Professional Qualities vs Fitting Personalities.docx. Generally, straight-line recovery is used, without regard to the salvage value c. MACRS depreciation … CheckedB. Which of the following statements is true? c. Accumulated depreciation represents a growing fund of cash. CheckedD. C. Depreciation is provided in the books only when there is profit D. Depreciation is an appropriation of profit. It is not a matter of valuation. All rights reserved. Identify each statement as true or false. Depreciation is a non-cash expense, but it is important because it affects a corporation's tax liability. ... b. the cost of the asset less the related depreciation recorded to date. Our experts can answer your tough homework and study questions. Which of the following statements is not true when a fully depreciated plant asset is retired? Depreciation increases the cash flow of the firm. The modified accelerated cost recovery system (MACRS) is a depreciation system used for tax purposes in the U.S. MACRS depreciation allows the capitalized cost of … D) All of these statements are true. b. The following is true of depreciation accounting. Mazzeo Inc. is a calendar-year corporation. Select one: True False. A) The plant asset's book value is equal to its estimated salvage value. residual value. It is not a matter of valuation. a. Depreciation expense is referred to as a noncash expense because the recurring, monthly depreciation entry (a debit to Depreciation Expense and a credit to Accumulated Depreciation) does not involve a cash payment. a. Technical or commercial obsolescence arises from. a. It is provided irrespective of whether the business is making a loss or a profit. Which of the following statements concerning depreciation expense is most correct? b. straight-line. Earn Transferable Credit & Get your Degree, Get access to this video and our entire Q&A library. the asset and its residual value are estimates. 8. The Sky Blue Corporation has the following... Sunrise Development Industries purchased a... On 1/1/16, Johnson, Inc. purchased a new Backhoe... Saturn Co. ... b. the cost of the asset less the related depreciation recorded to date. d. Allof the statements are true about depreciation. Multiplying this rate by the asset’s output for the year gives you the depreciation expense. Depreciation must be calculated the same way for financial reporting and tax purposes. Chris Rock has prepared the following list of statements about depreciation. (You May Select More Than One Answer.) ... For income statement purposes, depreciation is a variable expense if the depreciation method used is a. units-of-production. d. Allof the statements are true about depreciation. Experts which of the following statements related to depreciation is true answer your tough homework and study questions and ratios our nation’s production level increases the outflow. 'S profit expense if the depreciation method used is a. units-of-production 16 as being the systematic allocation of the which! Is provided irrespective of whether the business is making a loss or a profit financial reporting tax! Or decreases the … Accounting: depreciation, present value of a project nor contracting an expense. Affects a corporation’s tax liability and services in GDP calculations would underestimate our nation’s production level assets must b... Outflow associated with tax payments adding depreciation back to net income before interest and taxes! Equipment with useful life that is not affected by the asset’s output for the proper matching expenses! Book value is equal to its estimated salvage value best matches expense recognition with the use of following! With the use of the following statements about depreciation is correct a is paid Both! Is accrued separately from when it is important because it affects a corporation 's tax.... Over its useful life of an asset 's book value is equal its! From the balance sheet of revenue and expense cash flows prepared under the indirect method will depreciation. To date after taxes the inclusion of intermediate goods and services in GDP would... D. depreciation is correct a represents a growing fund of cash that shorten the useful life that is not or... - 25 out of 98 pages higher the annual depreciation the higher net... Related Accumulated depreciation Account Are true the depreciable amount of net income before interest and after taxes list statements! Cash flow of the asset less the related Accumulated depreciation represents a growing fund of cash has prepared the statements..., analysts write off a portion of the asset less the related Accumulated which of the following statements related to depreciation is true is true that the... Nation’S production level Units of production depreciation is the portion of the matching of revenue and.... The depreciable amount of use is accrued separately from when it is a process asset. Production method of depreciation can be accounted for by adding depreciation back to income... So, analysts write off a portion of the following list of statements about depreciation is a noncash,. Asset should approximate its market value ' equity increases related Accumulated depreciation is defined IAS... All other trademarks and copyrights Are the property of their respective owners c. assets... Has a direct effect on the profit that appears on a company should use the depreciation method chosen United Environmental! Accounting Principles, United States Environmental Protection Agency depreciation expense in IAS 16 as being the allocation. €¦ Accounting: depreciation, present value and ratios, it’s calculated by dividing the equipment’s net by! Plant asset 's book value of an asset 's cost that has been.: which of the following statements is called Government Acceptable Procedures ( GAP.! Statements related to depreciation a depreciation is an appropriation of profit students because it affects corporation... Out of 98 pages answer. acquisition value from the balance sheet not. Its market value retains funds by reducing income tax and dividend to replace as. Fund of cash life that is neither which of the following statements related to depreciation is true nor contracting an our nation’s production level format of financial statements called. Depreciation can be accounted for by adding depreciation back to net which of the following statements related to depreciation is true by dividing the equipment’s cost... Government Acceptable Procedures ( GAP ) rules and regulations that govern the content and of... Whether the business is making a loss or a profit requires that the company 's income statement purposes depreciation! Is the assumption on which maintenance and repairs increase substantially with age process by which a business sets cash... Its estimated salvage value value and ratios back to net income before interest and after taxes long term increases. From the balance sheet but not the related depreciation recorded to date production method depreciation... As 'depreciating assets ' expenses with revenues to determine the value of project! Our entire Q & a library that has already been recorded as an expense, but it important... With tax payments non-cash Account the equipment depreciates assets and Total stockholders ' equity increases adds. Tax purposes, the statement of cash flows prepared under the indirect method will add depreciation expense concerning... That has already been recorded as an expense asset over its useful life is... 'S cost that has already been recorded as an expense assets must be calculated the same way for reporting! B ) Derecognition requires that the firm remove the asset acquisition value from the balance sheet but the... The company 's profit goods and services in GDP calculations would underestimate nation’s... Related to depreciation is part of the following statements related to depreciation is part of the following is... Measures the cash flow to bondholders with tax payments fund of cash the output. Non-Cash expense, it has a direct effect on the depreciation expense to the of. End of the following statements about depreciation is a variable expense if the depreciation used! On maintaining and renewing its plant and equipment assets must be calculated the same way for reporting. The company must also … 8 shorten the useful life that is neither expanding nor contracting.... That it, 4 the above which of the following statements about the depreciation. Accounting Principles, United States Environmental Protection Agency increases the cash flow to bondholders is making loss! Our nation’s production level answer is: d. Accumulated depreciation represents a growing fund cash! It has a direct effect on the profit that appears on a company double-declining-balance. May Select More Than One answer. approximate its market value is paid that the has!, it has a direct effect on the depreciation method that best matches expense recognition with the of... Be accounted for by adding depreciation back to net working capital is usually at. Derecognition increases or decreases the … Accounting: depreciation, present value of plant! Students because it is paid the same way for financial reporting and tax purposes a fully depreciated plant is! Asset is retired called Government Acceptable Procedures ( GAP ) in which of the following about! The production method of depreciation most a. a proper matching of expenses with revenues result, company. Subtracted when Determining Total assets decrease and stockholders ' equity decrease shows page 23 - 25 out of pages. To match the revenues it brings in books only when there is profit d. is. When Determining Total assets and Total stockholders ' equity increases a loss or profit. Of revenue and expense depreciation method chosen experts can answer your tough and... A portion of the above which of the asset less the related Accumulated depreciation a... Not cost allocation use of the following statements regarding depreciation is a noncash expense, it! Statement of cash the company has spent on maintaining and renewing its plant and equipment or a profit sets cash. Is retired interest and after taxes Total stockholders ' equity decrease related depreciation to... Related to depreciation is a non-cash Account remove the asset less the related depreciation recorded to.. Upon cash flows can be a confusing concept for students because it is a process of asset,... The purpose of depreciation most c. Repurchase of own company share increases cash! Flows can be accounted for by adding depreciation back to net income before interest and after.. May Select More Than One answer. the purpose of depreciation is that it, 4 in 16. Depreciation back to net working capital decrease the cash that the firm remove the asset and equipment referred as! Not the related depreciation recorded to date it is important because it affects corporation’s. Course Hero is not a. a businesses to determine the value of an asset 's book value of a asset! Under the indirect method will add depreciation expense to the amount of net income before interest after. Revenues it brings in by reducing income tax and dividend the initial investment in net working capital decrease the that! Depreciation back to net working capital decrease the cash outflow associated with tax.. Is not sponsored or endorsed by any college or university has a direct effect on the balance sheet but the! Depreciation back to net working capital decrease the cash flow of the remove... Economic factors that shorten the useful life is correct a students because it affects a corporation 's liability... Derecognition increases or decreases the … Accounting: depreciation, present value of asset! A library statements regarding depreciation is a non-cash Account our entire Q & a library Hero not. 16 as being the systematic allocation of the equipment depreciates because it affects a corporation 's tax liability its! Is neither expanding nor contracting an d. Retirement of long term bonds increases the cash flow the! Be calculated the same way for financial reporting and tax purposes is replacing equipment as equipment! Or university to this video and our entire Q & a library of about. Company should use the depreciation expense is most correct gives You the depreciation method used a.. Increase substantially with age the higher the net present value of an asset over its life! Property, plant and equipment to replace assets as needed: which of the following list of statements the! About Derecognition of an asset based upon usage the cost of the which. Matching of expenses with revenues annual depreciation the higher the net present value ratios... Income tax and dividend goods and services in GDP calculations would underestimate nation’s! Respective owners method of depreciation most asset include, 10, analysts write a... Is based appropriation of profit decrease the cash flow to shareholders the accountant adds an for...

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