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Property, Plant and Equipment Depreciation
This is another question that I want clarification on. I hope I answered this one correctly as well:
6. Which of the following statements about property, plant, and equipment and depreciation is true? a.Plant, property, and equipment assets are sold to customers in the normal course of business. b.Accounting requires that the cost of a depreciable asset be recorded as an expense over times benefited by that asset. c.Accumulated depreciation is the total amount of depreciation that has been recorded on a depreciable asset in the current period. d.Accounting and general usages of the term depreciation are the same. e.Land is a depreciable asset. I picked e. as being the completely true answer, because Land is considered a depreciable asset. It would be placed under the Land account on the balance sheet |
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Ok, thinking that Land is NOT depreciable (where is my head) the only other thing that I can say to be true is A.: Plant, property, and equipment assets are sold to customers in the normal course of business.
This has to be right, because the others don't make sense... a depreciable asset cannot be recorded as an expense. |
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Strike Two. Assets that are "sold to customers in the ordinary course of business"... well, that's the very definition of Inventory, not PP&E assets.
I've got to sign off for a bit, but I'll leave you with this: When you buy a depreciable asset, the cost thereof is an expense. But unlike, say, rent or utilities, it's not just an expense of the month or year in which it's purchased. Instead, you should consider the cost of the asset as being an expense allocable to the period (several years, usually) over which you'll use the asset. This is the concept that's at the heart of depreciation accounting, and when you think it through, you'll see which of your possible answers best squares up with this concept. Good luck! |
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