Property, plant, and equipment (PP&E)

Which of the following statements accurately describes property, plant, and equipment (PP&E)?

• PP&E are current assets that a business owns for a brief period of time.

• PP&E are investments in long-term assets that are expected to generate economic benefits for many years.

• PP&E are intangible assets like patents and copyrights.

• PP&E are liabilities that a business owes to its suppliers.

PP&E are investments in long-term assets that are expected to generate economic benefits for many years.

PP&E are investments in long-term assets that are expected to generate economic benefits for many years.

Which depreciation method records the same amount of depreciation expense each accounting period during an asset’s service life?

• Accelerated depreciation

• Units of production

• Straight-line depreciation

Straight-line depreciation

The straight-line depreciation method evenly distributes the depreciation expense over the asset’s service life. This means that the same amount of depreciation is recorded in each account period.

Which depreciation method considers the usage or production level of an asset to calculate depreciation?

• Straight-line depreciation

• Accelerated depreciation

• Units of production

Units of production

The units of production depreciation method takes into account how much the asset is used or has produced each year. The depreciation expense is calculated based on the units or output achieved during the asset’s service life.

What is the formula used in the units of production method to calculate depreciation?

• (Cost of asset / estimated service life)

• (Annual usage / cost of asset)

• (Total units produced / estimated service life)

• (Estimated service life / annual usage)

(Total units produced / estimated service life)

In the units of production depreciation method, the depreciation expense is calculated by dividing the total units produced or the actual usage of the asset by the estimated service life. It’s important to note that the actual formulas and calculations may vary depending on the specific details and requirements of each depreciation method.

Spreading out the cost of an item over its expected life

Depreciation

The total amount of depreciation expense that has been allocated for an asset since the asset was put into use.

Accumulated depreciation

The cost of an asset that has been depreciated for a single period. It shows how much of the asset’s value has been used up in that year.

Depreciation expense

An estimate of how long you can reasonably expect to use an asset for your business.

Service life