AIPB Mastering Depreciation
Study online at https://quizlet.com/_hv7yiw
1. The adjusting entry to record $5,000 of depreciation expense in the general
ledger is ?: Debit Depreciation Expense
Credit Accumulated Depreciation
2. When a CPA performs a Review ?: Prepares a report describing their limited inspection of the
financial statements and found NO MATERIAL differences from GAAP Rules.
3. What is Depreciation ?: A system of allocating the cost of fixed assets over their estimated life.
4. A company that prepares if financial statements for a tax return or will not be
looked at by a third party can use which Depreciation Rule?: IRS Rules
5. A company that prepares its financial statements for a third party, such as a
bank for potential investors, or for a company that may want to acquire it, must
use what Depreciation Rule ?: GAAP
6. When a CPA performs an Audit ?: Examines the companies financial statements and expresses an
opinion on whether they materially conform to GAAP rules.
7. When a CPA performs a Compilation, they do what ?: Organizes financial data into Financia
Statements Does NOT express an opinion on reliability of the statements or whether they conform to GAAP.
8. Is land depreciable ?: No
9. Which accounts can recording depreciation effect ?: Depreciation Expense, Accumulated
Depreciation , and Inventory -Work in Process
10. A company can use tax rules on their financial statements if...: The difference
between GAAP and IRS Rules is not material.
11. A company that wants a CPA to do a review of its financial statements
depreciates its plant and equipment assets under GAAP for its federal income
tax return ? true or false: false-a company that wants a CPA to do a review of its financial statements must
depreciate its plant and equipment assets under GAAP only for its financial statements. Depreciation on the TAX RETURN
must always use TAX RULES
12. Many of the concepts underlying tax depreciation rules are similar to the
concepts underlying GAAP depreciation rules. true or false: True
13. What is the Purpose of Depreciation ?: To spread out the cost of the asset over the years, to
match that assets cost with the revenue it helps generate each year.
14. If a company is required to have an audit of its financial statements then....: If
GAAP depreciation is materially different form tax depreciation, the company must use the GAAP amount for its financia
statements and the tax amount for its tax return.
1/8
, AIPB Mastering Depreciation
Study online at https://quizlet.com/_hv7yiw
15. The purpose of depreciation is to ______________ the asset's cost to the rev-
enue that it helps the organization earn each year over its life.: match
16. A company is required to have an independent CPA audit its year-end finan-
cial statements if.....: the company must demonstrate that its financial statements conform with GAAP. The
company's stock is publicly traded.
17. Financial statement s prepared for company management ____________ have
to use GAAP depreciation rules.: do not
18. If a company uses the tax depreciation amount on its financial statements,
a CPA performing an audit will require the company to adjust depreciation
expense if the difference between the tax amount and the GAAP amount is
____________________.: material
19. The straight-line (SL) method.: The asset is depreciated by dividing the depreciable base (acquisition
cost-residual value) by the number of years in the estimated life to determine each year's depreciation expense. Thus,
under SL, each year's depreciation expense is the same.
20. The Units of production (UOP) or units of output method.: The asset is depreciated
each year according to the number of units produced, total hours used, total miles driven, or other measure of
production. Thus, under UOP, the amount of annual depreciation fluctuates by output or use.
21. The Accelerated methods.: There are two methods of accelerated depreciation. They are called
accelerated because they provide more annual depreciation expense in the earlier years of the asset's life and less
depreciation expense in the later years. The two accelerated methods are the declining balance (DB) method and the
sum-of-the-years'-digits (SYD) method.
22. Computing Book Value: Book value, or net book value, does not represent an asset's fair market value.
Instead, it represents the undepreciated cost of the asset as it appears on the company's books and balance sheet.
Book value is the acquisition cost less accumulated depreciation (accumulated depreciation is all depreciation expense
taken
23. Which depreciation method is not based on the number of accounting
periods in which an asset is used: The units of production method is based on an asset's usage and
not on the number of periods (years, quarters, etc.) in which the asset is used.
24. What is the journal entry to record the purchase of the machine?: Debit Asset-Ma-
chine
Credit Cash
2/8
Study online at https://quizlet.com/_hv7yiw
1. The adjusting entry to record $5,000 of depreciation expense in the general
ledger is ?: Debit Depreciation Expense
Credit Accumulated Depreciation
2. When a CPA performs a Review ?: Prepares a report describing their limited inspection of the
financial statements and found NO MATERIAL differences from GAAP Rules.
3. What is Depreciation ?: A system of allocating the cost of fixed assets over their estimated life.
4. A company that prepares if financial statements for a tax return or will not be
looked at by a third party can use which Depreciation Rule?: IRS Rules
5. A company that prepares its financial statements for a third party, such as a
bank for potential investors, or for a company that may want to acquire it, must
use what Depreciation Rule ?: GAAP
6. When a CPA performs an Audit ?: Examines the companies financial statements and expresses an
opinion on whether they materially conform to GAAP rules.
7. When a CPA performs a Compilation, they do what ?: Organizes financial data into Financia
Statements Does NOT express an opinion on reliability of the statements or whether they conform to GAAP.
8. Is land depreciable ?: No
9. Which accounts can recording depreciation effect ?: Depreciation Expense, Accumulated
Depreciation , and Inventory -Work in Process
10. A company can use tax rules on their financial statements if...: The difference
between GAAP and IRS Rules is not material.
11. A company that wants a CPA to do a review of its financial statements
depreciates its plant and equipment assets under GAAP for its federal income
tax return ? true or false: false-a company that wants a CPA to do a review of its financial statements must
depreciate its plant and equipment assets under GAAP only for its financial statements. Depreciation on the TAX RETURN
must always use TAX RULES
12. Many of the concepts underlying tax depreciation rules are similar to the
concepts underlying GAAP depreciation rules. true or false: True
13. What is the Purpose of Depreciation ?: To spread out the cost of the asset over the years, to
match that assets cost with the revenue it helps generate each year.
14. If a company is required to have an audit of its financial statements then....: If
GAAP depreciation is materially different form tax depreciation, the company must use the GAAP amount for its financia
statements and the tax amount for its tax return.
1/8
, AIPB Mastering Depreciation
Study online at https://quizlet.com/_hv7yiw
15. The purpose of depreciation is to ______________ the asset's cost to the rev-
enue that it helps the organization earn each year over its life.: match
16. A company is required to have an independent CPA audit its year-end finan-
cial statements if.....: the company must demonstrate that its financial statements conform with GAAP. The
company's stock is publicly traded.
17. Financial statement s prepared for company management ____________ have
to use GAAP depreciation rules.: do not
18. If a company uses the tax depreciation amount on its financial statements,
a CPA performing an audit will require the company to adjust depreciation
expense if the difference between the tax amount and the GAAP amount is
____________________.: material
19. The straight-line (SL) method.: The asset is depreciated by dividing the depreciable base (acquisition
cost-residual value) by the number of years in the estimated life to determine each year's depreciation expense. Thus,
under SL, each year's depreciation expense is the same.
20. The Units of production (UOP) or units of output method.: The asset is depreciated
each year according to the number of units produced, total hours used, total miles driven, or other measure of
production. Thus, under UOP, the amount of annual depreciation fluctuates by output or use.
21. The Accelerated methods.: There are two methods of accelerated depreciation. They are called
accelerated because they provide more annual depreciation expense in the earlier years of the asset's life and less
depreciation expense in the later years. The two accelerated methods are the declining balance (DB) method and the
sum-of-the-years'-digits (SYD) method.
22. Computing Book Value: Book value, or net book value, does not represent an asset's fair market value.
Instead, it represents the undepreciated cost of the asset as it appears on the company's books and balance sheet.
Book value is the acquisition cost less accumulated depreciation (accumulated depreciation is all depreciation expense
taken
23. Which depreciation method is not based on the number of accounting
periods in which an asset is used: The units of production method is based on an asset's usage and
not on the number of periods (years, quarters, etc.) in which the asset is used.
24. What is the journal entry to record the purchase of the machine?: Debit Asset-Ma-
chine
Credit Cash
2/8
