 In this presentation, we will take a look at multiple choice questions related to property, plant, and equipment. First question, straight line depreciation calculation. A, cost divided by useful life. B, cost and salvage value divided by useful life. C, cost minus salvage value divided by useful life. D, cost multiplied by useful life percent. E, cost divided by useful life in units. The best way to look at this type of problem might be to actually put some numbers in there and just think through a calculation. So if we had a straight line depreciation calculation, how would we calculate that? Typically, we would have the cost. So if you were to make something up and say, well the cost is like 11,000 and that's how much we bought it for. The thing that you need to remember is then we subtract out the salvage value. So if it had a salvage value of 1,000, we'd subtract that out. That gives us the amount to be depreciated. And then we're going to divide that by the useful life. So we're going to take that over the useful life if we're saying that there's 10 years and we're going to divide that will give us the depreciation. So if you think through this and think through the components here, then you can that might be the easiest way to do it put some numbers to it. So then we're going to say the A says cost divided by the useful life. Now that's close and you might think that's the answer but we knew we don't forget the salvage value. So we have to take into account the salvage. So it's not that cost and salvage value divided by useful life. Now that would imply and implying addition and we're not adding or subtracting. So it's not adding salvage. C says cost minus salvage value divided by useful life. That seems good. That seems right. D says cost might multiply by useful life percent. Now we could have a straight line percentage used but not the it wouldn't be called the useful life percent. In other words we you know we might come up with some straight line percentage but that's not doesn't look right. And then E says cost divided by useful life in units. And the straight line method isn't a method that's going to use units for allocations. That doesn't look good. So C looks like the correct answer. So we have the straight line depreciation calculation C cost minus salvage value divided by the useful life. Next question. Land improvements are a assets that increase the useful usefulness of land and are not subject to depreciation. B assets to increase the usefulness and are subject to depreciation. C included in the cost of the land. D expense in the period purchased. And E also called intangible assets. So let's go through the skin. Land improvements are a assets that increase the usefulness of land and are not subject to depreciation. Now it does increase the usefulness of land but the question of course is comes to this depreciation. Now note that B says as you know much the same thing assets that increase the usefulness and are not subject to depreciation. So oftentimes when we have two answers that are pretty much the same and they have a bit different wording somewhere that we could suspect that those one of those two would be the correct answers. So I'm going to go back to those two and I'm going to think that one of those probably looks good. So C says included in the cost of the land and that might seem appropriate but we're not going to include the land improvements in the cost of the land. We're going to actually break out the land improvements into into their own subcategory. And so D says expense in the period purchased. And if they're land improvements that are going to help for multiple periods in the future then typically we will not will capitalize those also called intangible assets. And if they're part of land they're going to be tangible we can touch land. So land is typically tangible so that doesn't look correct. So between A and B land improvements are A assets that increase usefulness of land and are not subject to depreciation or B assets that increase usefulness and are subject to depreciation. Now when we think about improvements we usually think about something that's like connected to the land but part of the land like a parking lot or if a road on the land or you know if we're putting some kind of sign on the land or something like that or just the landscaping. So something that's part of the land but it typically will go down in value if we don't maintenance it. So a parking lot will go down and if we just have a parking strike it will go down in value. The landscaping will go down in value. So although the land itself we don't depreciate the improvements we do and so that's going to be B here is going to be the more correct answer the the correct answer. So land improvements are B assets to increase the usefulness and are subject to depreciation. Next question which of the following is not property, plant, and equipment. A, land, B, parking lot, C, buildings, D, forklift, E, patent. So if we go through this again which of the following is not property, plant, and equipment. So remember property, plant, and equipment is going to have a useful life of more than typically one year more than one period and it's something that's tangible typically we can touch it. So first we have land. Now you might think land might not seem right but it because but it is it's it's going to be it's part of property, plant, and equipment. So it's a bit unusual for property, plant, and equipment in that we don't depreciate it but it still is included in the property, plant, and equipment. Parking lot. Parking lot is is part of property, plant, and equipment. A building is part of property, plant, and equipment. A forklift if used in normal business operations would be equipment that would be included. So we're left with a patent and the patent does have a useful life but isn't property, plant, and equipment typically because it's intangible. So that's going to be an intangible asset. We're going to treat it much the same put it on the books as an asset and then try to allocate the cost over its useful life but not a tangible asset. So therefore answer patent question which of the following is not property, plant, and equipment? E. Patent