Fill in the GAAP
Revenues are recognized when they're ...
What is earned?
(Revenue Recognition Principle)
An estimate of how long it can be used.
Useful life.
Depreciation allows us to decrease the value of a fixed asset over time.
True.
The value in this column never changes.
Expenses are recognized when they're ...
What is incurred?
An estimate of how much the asset will be worth at the end of its useful life.
Salvage value.
Depreciation is recorded at the end of the accounting time period.
True.
Original cost - accumulated depreciation =
Net book value
This allows us to divide the life of a business into accounting periods.
What is the time period assumption?
An object that is no longer wanted even though it may still work.
What is obsolete?
We depreciate all fixed assets.
False. (Not land)
A fixed asset purchased March 31 will be depreciation for this many months in the first year.
9 months
All fixed assets are recorded as the value on the day they were purchased.
What is the cost principle?
To calculate monthly depreciation once you know the annual depreciation you ...
divide by 12
The net book value in the bottom row of a depreciation table should always equal 0.
False
To calculate accumulated depreciation ...
add together the depreciation expenses to date
Different people looking at the same evidence will arrive at the same values for the transaction.
Objectivity Principle
Accumulated depreciation is this type of account.
Contra-asset
We use the reducing balance method of depreciation.
False. (Straight Line method)
The net book value of a fully depreciated fixed asset equals
the salvage value