Bookkeeping 32. Dep

Question 1

1. p. 82. DEPRECIATION.
   Fixed assets are not for sale, they are used in operating the business. Their cost cannot be expensed in one year because:

Answer 1

they last a long time. Their cost is spread over their useful life by deducting a part of it each year as DEPRECIATION expense.

Question 2

2. To determine the value of a piece of equipment at any time in its life, what accounts are needed?

Answer 2

• DEPRECIATION EXPENSE (becomes a part of OPERATING EXPENSES).
• ACCUMULATED DEPRECIATION (Contra Asset account charged against assets).

Question 3

3. What is the entry for DEPRECIATION EXPENSE?

Answer 3

Dep Exp……1000
Accum Dep…1000

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Question 4

4. Any REDUCTION to an asset is considered:

Answer 4

AN EXPENSE. However, no MOVEMENT OF CASH or writing a check is required for DEPRECIATION EXPENSE.

Question 5

5. The DEPRECIATION EXPENSE amounts are TRANSFERRED from:

Answer 5

DEPRECIATION SCHEDULES on which the calculations are made.

Question 6

6. If an asset is purchased during the first half of the month, how much depreciation is taken for the month?

Answer 6

a WHOLE MONTH’S depreciation.

Question 7

7. If an asset is purchased during the second half of the month, how much depreciation is taken that month?

Answer 7

NONE for that month.

Question 8

8. What is BOOK VALUE and how is it determined?

Answer 8

BOOK VALUE is the CURRENT DEPRECIATED VALUE of the asset, and it is determined by subtracting its ACCUMULATED DEPRECIATION from its COST.

Question 9

9. A truck is purchased for 25k, and with ACCUMULATED DEPRECIATION of 5k, it would appear on the PLANT ASSETS section of the Balance Sheet as:

Answer 9

PLANT ASSETS
Truck…………….…25k
Less Accum Dep….5k

TOT PLNT ASSTS……….20k

Question 10

10. What is the entry for land DEPRECIATION?

Answer 10

LAND IS NOT DEPRECIATED.