ACCOUNTING 2 - FIRST QUIZ (TRUE OR FALSE)
False 1. PPE assets are set apart used in company operations that have useful life less than one accounting period.
True 2. PPE assets are set apart from other assets by two important features.
True 3. The purpose of depreciation is to spread the cost of a long-term asset over the accounting periods to which it
provides benefit.
True 4. Matching principle governs the accounting for PPE and its depreciation.
False 5. When a business constructs new building, the cost of the building should include insurance on the building after
the building has been completed.
True 6. Fair market value is the best guide in determining the selling price.
False 7. If an asset is purchased at October 1, 2006 for 900,000 and depreciation is calculated at 120 per hour, 3000 hours
of service will require recording depreciation of 90,000 (3000 x 120 x 3/12)
False 8. Units of production method is an accelerated depreciation method.
True 9. Straight-line method is a depreciation method regularly used when preparing financial statement because it is
simpler.
True 10. Before the appropriate amount of gain or loss on disposal of an asset can be determined, the depreciation must be
updated.
False 11. When an asset with a cost of 68,000 and a book value of 8,000 is discarded, there will be a gain on disposal of
8,000.
True 12. When several assets are purchased as a group, total cost is divided among the assets according to their relative
sales value.
True 13. An asset is obsolete when another asset can do the job more efficiently.
True 14. Units-of-output works best with an asset that depreciates due to wear and tear rather than obsolescence.
False 15. An oil deposit is an intangible asset.
False 16. When a business acquires land as a site to construct a new store, the cost of removing usable buildings, grading,
clearing, and delinquent real taxes should be recorded as part of the cost of the new store.
False 17. The cost of the second-hand machine assembled would be charged to an expense account since the machine is not
new.
True 18. Accumulated Depletion is not a contra-liability account.
PROPERTY OF KMG.
False 1. PPE assets are set apart used in company operations that have useful life less than one accounting period.
True 2. PPE assets are set apart from other assets by two important features.
True 3. The purpose of depreciation is to spread the cost of a long-term asset over the accounting periods to which it
provides benefit.
True 4. Matching principle governs the accounting for PPE and its depreciation.
False 5. When a business constructs new building, the cost of the building should include insurance on the building after
the building has been completed.
True 6. Fair market value is the best guide in determining the selling price.
False 7. If an asset is purchased at October 1, 2006 for 900,000 and depreciation is calculated at 120 per hour, 3000 hours
of service will require recording depreciation of 90,000 (3000 x 120 x 3/12)
False 8. Units of production method is an accelerated depreciation method.
True 9. Straight-line method is a depreciation method regularly used when preparing financial statement because it is
simpler.
True 10. Before the appropriate amount of gain or loss on disposal of an asset can be determined, the depreciation must be
updated.
False 11. When an asset with a cost of 68,000 and a book value of 8,000 is discarded, there will be a gain on disposal of
8,000.
True 12. When several assets are purchased as a group, total cost is divided among the assets according to their relative
sales value.
True 13. An asset is obsolete when another asset can do the job more efficiently.
True 14. Units-of-output works best with an asset that depreciates due to wear and tear rather than obsolescence.
False 15. An oil deposit is an intangible asset.
False 16. When a business acquires land as a site to construct a new store, the cost of removing usable buildings, grading,
clearing, and delinquent real taxes should be recorded as part of the cost of the new store.
False 17. The cost of the second-hand machine assembled would be charged to an expense account since the machine is not
new.
True 18. Accumulated Depletion is not a contra-liability account.
PROPERTY OF KMG.
