Fundamental Accounting Principles Volume 2 17th Edition By Kermit D. Larson test bank

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155)       Because land has unlimited life, it is not subject to depreciation. Therefore, items that increase the usefulness of the land such as parking lots are also not depreciated.

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156)       Depreciation is the process of allocating the cost of a tangible asset in a rational and systematic manner over the asset's estimated useful life.

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157)       Residual value is an estimate of an asset's value at the end of its useful life.

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158)       Inadequacy refers to the condition where the capacity of a property, plant and equipment item is too small to meet the company's productive demands.

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159)       Depreciation should always be recorded as soon as an asset is purchased.

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160)       Depreciation measures the decline in market value of an asset.

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161)       On the balance sheet, it is not necessary to report both the cost and the accumulated depreciation of an asset.

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162)       Accumulated depreciation represents funds set aside to buy new assets when the assets currently owned are replaced.

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163)       The full disclosure principle allows us to record an asset costing $50 as a revenue expenditure

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164)       Regardless of the method of depreciation, total depreciation expense will be the same over an asset's useful life.

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165)       Financial accounting and tax accounting require the same recordkeeping; therefore, there should be no difference in results between the two accounting systems.

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166)       Companies are required to use the straight-line depreciation method for tax purposes because this method yields the lowest depreciation expense and results in the highest payment of tax.

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167)       The Income Tax Act requires that companies use a declining-balance method for calculating the maximum capital cost allowance that may be claimed in any period

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168)       The most frequently used method of depreciation is the straight-line method.

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