Page 446 - Accounting Principles (A Business Perspective)

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Property, plant, and equipment is depreciated over its estimated life by the unit-of-production or the straight-
line-method.
a. How many different depreciation methods are used by Kerr-McGee Corporation? Does this practice conform

with generally accepted accounting principles?
b. Discuss why management might select each of these methods to depreciate plant assets.
Group project F In a group of two or three students, visit a large company in your community and inquire
about the subsidiary records it maintains to establish accounting control over its plant assets. Also inquire about
physical controls used to protect its equipment that is movable, such as computers, copy machines, and so on.
Write a report to your instructor summarizing your findings and be prepared to give a short report to your class.
Group project G With a team of two or three students, visit two companies in your community to inquire

about why they use certain depreciation methods. Try to locate companies that use several depreciation methods in
accounting for various depreciable fixed assets. Interview those who made the decision as to methods to use to find
out the reasons for their choices. Write a report to your instructor summarizing your findings.
Group project H In a small group of students, visit a large company in your community to determine how it
decides to account for expenditures on fixed assets made after the assets have been in use for some time. In other
words, how does it decide whether to debit the asset account, the accumulated depreciation account, or an expense
account? What role does materiality play in the decision? Evaluate the reasonableness of the decision model used.
Write a report to your instructor summarizing your findings and be prepared to make a short presentation to your
class.

Using the Internet—A view of the real world
Visit the CPA Review site at:
http://www.beckerconviser.com
Investigate this site. Identify the major types of employers. Make note of any interesting information at this site.

Write a report to your instructor summarizing your findings. Be prepared to make a short presentation to the class.
Visit the Best Software website at:
http://www.bestsoftware.com
What types of software does the company sell? Why might a company buy a software package from Best
Software? Study any other aspect of the information that looks interesting. Write a report to your instructor
summarizing your findings.

Answers to self-test
True-false
True. The cost of land includes all normal, reasonable, and necessary expenditures to obtain the land and get it
ready for use.
False. Depreciation is a process of allocation, not valuation, and the book value of an asset has little to do with
its market value.
False. Depreciation accounting does not provide funds required to replace plant assets. Instead, accumulated

depreciation simply shows how much of an asset's cost has been charged to expense since the asset was acquired.
False. Expenditures that improve the quality of services are charged to the asset account.

Accounting Principles: A Business Perspective 447 A Global Text