 In this presentation, we will take a look at multiple choice questions related to property, plant, and equipment. First question. Depreciation method that allocates depreciation using a constant depreciation rate times the asset's book value. A. Accelerated depreciation. B. Declining balance depreciation. C. Straight line depreciation. D. Units of production depreciation or E. Modified accelerated cost recovery system. So if we read through this again, depreciation method that allocates depreciation using a constant depreciation rate times the asset's book value. So that's a bit more obviously it sounds a bit more complex complicated of a method. We typically the first method we would think of is probably the straight line method. And this sounds like it's a little bit more confusing than that, not just the straight line. So it doesn't look like it's C. I'm probably going to say C is not the correct answer. A says accelerated depreciation. That could be the correct answer. B says declining balance method. Now the thing about those two is that the declining balance method is a form of accelerated method. So it's possible that the declining balance method is more specific than the accelerated methods. I'll keep those both for now. D says units of production depreciation. Now there's nothing in this this calculation method that talks about units being involved. So I don't think it's going to be anything with the units of production. And then E says modified accelerated cost recovery system. And that has to do with the tax code. So that's a tax code depreciation. So we might think that it's that but it's actually that's that's not going to be it as well. And unless we're talking about a tax code type problem that modified accelerated might be something that's thrown in there for financial accounting but probably not going to be the correct answer for most of it if we're focusing on financial accounting and not the tax code. So we're left with A and B. Once again depreciation method that allocates depreciation using a constant depreciation rate times the asset's book value either A accelerated depreciation or B declining balance depreciation. And the answer is actually going to be B here that being more specific these are the B is a form of accelerated method but it's more specific being what we're using here the declining balance method to record the book value times a particular rate in order to get depreciation per year. So the answer one more time depreciation method that allocates depreciation using a constant depreciation rate times the asset's book value B declining balance depreciation. Next question an asset disposal can include all except A discarding the asset B selling the asset C exchanging the asset D donating the asset to charity or E holding the asset after it's fully depreciated. So if we read through this again an asset disposal can include all except A discarding the asset. Now when we think of the disposal we're getting rid of the asset in some way so we can do that by discarding it we can just get rid of it so that seems correct so it's not the answer. B says selling it and we could sell it at the end that would be a way to discard it either for you know maybe just for scrap even to sell it at the end if it's useful life and then C says exchange the asset which is really just another form of sale so we could exchange it for something else and that would be kind of like a sale. We could donate it to charity that be a way to discard the asset and then E says so it should be E holding the asset after it is fully depreciated. Now if we just hold on to the asset when it's still fully depreciated it doesn't mean because it's fully depreciated that it doesn't have value still meaning we may have fully depreciated it it may have a book value of zero on the books although it's still useful to us and we're still using it. What that means is that our estimate of depreciation was not exactly correct because it still has a useful life past when it's been fully depreciated but we can't keep on depreciating it past you know zero so it's been fully depreciated so it is possible for us to have assets still in use or that we're still holding on to that we have not yet discarded even though they are fully depreciated so the answer then an asset disposal can include all except holding the asset after it is fully depreciated. Next question the cost of land does not include a purchase price b government assessment costs c costs of removing existing building d title fees e cost of a parking lot so once again if we go through this we're going to say the cost of land does not include a the purchase price and obviously that's going to be part of the cost of land the purchase price b says the government assessment costs and that could be a cost in the in the land so so let's leave that for now c says costs removing existing building now this is the one you want to keep in mind all the time if we buy the land and we buy it in order to build a new building on it for example and there's already an existing structure on the land because it's not something that we bought the land for the building not being part of something that we want something that we actually have to tear down in order to get the land to be useful to us it will be included in the cost of land not included in something separate like a cost of building so be careful with that one that one comes up a lot on questions d says title fees we actually will include any any title fees related to the land to the cost of the land and then the cost of a parking lot now a parking lot is probably going to be an improvement if we plan on keeping the parking lot it's probably going to be separately recorded because we need to depreciate the parking lot possibly so i would think that e might be something separate so if we go through this b and e the cost of land does not include either b government assessment costs or e costs the parking lot now if the assessments were were part of the purchasing process in order to be able to purchase the land i would think that would still be part of the cost of the land and the parking lot then would be something that would be different and there needs to be depreciated would go down in value over time so i think the parking lot would be something if we kept it that would be different so answer e cost of the parking lot question cost of land does not include cost of the parking lot