Question

True/False

1.___ Almost all property, plant, and equipment (PP&E) is depreciated, which means that its cost is spread over its useful life.
2. ____ PP&E is a long-term asset.
3. ____ If PP&E is found to be permanently impaired, a loss must be recorded.
4. ____ If an expenditure increases the useful life of an asset, it should be
capitalized, not expensed.
5. ____ It does not matter how a company divides a basket purchase since all the
assets will be depreciated anyway.
6. ____ Companies are allowed to capitalize interest while they are constructing
an asset because the asset is not available to generate revenues yet.
7. ____ The only acceptable method of depreciation is straight-line.
8. ____ Accumulated depreciation is a contra-asset account.
9. ____ The purchase price of an asset is capitalized, but costs like transportation
and set up of the asset should be expensed as incurred.
10. ____ Both assets used to generate revenue from operations and assets held
as investment property are reported as PP&E on the balance sheet.

Answer 1

1. TRUE

2. TRUE

3. TRUE

4. TRUE

5. TRUE

6. TRUE

7. FALSE

There are other methods also like sum of the years' digit method, Double declining balance method etc

8. TRUE

9. FALSE

All the costs (including transportation cost and set up costs)  till the asset is ready to use, should be capitalized.

10. FALSE

Assets held as investment property should be classified under Investments while assets used to generate revenues should be classified as Property, plant & Equipment.