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Indicate Whether Each of the Following Statements Regarding Accounting for Long-Term

Question 93

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Indicate whether each of the following statements regarding accounting for long-term assets is true or false.

Premises:

Responses:

The book value of an asset is the amount a company believes it is worth (its fair value)as of the date of the balance sheet.

False

Depreciation expense is an example of a "non-cash" expense.

True

Other things being equal,the lower a company estimates the salvage value of a plant asset to be,the higher the company's net income will be.

A company that uses the straight-line method for financial statement reporting and MACRS for tax reporting will show a deferred tax liability in an assets early life.

For tax purposes,the most desirable depreciation method is the one that produces the lowest amount of depreciation expense.

Premises:

The book value of an asset is the amount a company believes it is worth (its fair value)as of the date of the balance sheet.

Depreciation expense is an example of a "non-cash" expense.

Other things being equal,the lower a company estimates the salvage value of a plant asset to be,the higher the company's net income will be.

A company that uses the straight-line method for financial statement reporting and MACRS for tax reporting will show a deferred tax liability in an assets early life.

For tax purposes,the most desirable depreciation method is the one that produces the lowest amount of depreciation expense.

Responses:

False

True

Correct Answer:

Premises:

Responses:

The book value of an asset is the amount a company believes it is worth (its fair value)as of the date of the balance sheet.

Depreciation expense is an example of a "non-cash" expense.

Other things being equal,the lower a company estimates the salvage value of a plant asset to be,the higher the company's net income will be.

A company that uses the straight-line method for financial statement reporting and MACRS for tax reporting will show a deferred tax liability in an assets early life.

For tax purposes,the most desirable depreciation method is the one that produces the lowest amount of depreciation expense.

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