Question

Over the life of a depreciable asset, it’s recorded cost decreases, the related accumulated depreciation increases and the book value remains constant.

True or false

Expenditures for ordinary maintenance and repairs of plant assets are capital expenditures.

True or false

Answer 1

1)False

Explanation: over the life of a depreciable asset , recorded value remains constant ,while Accumulated depreciation increases and book value decreases , provided there is no revaluation has been made.

For Example- ABC Co. bought a Machine costing 10000$ as beginning of the 1st year charged depreciation 2000$ on straight line basis.

Here During 1st year

Record Value will be 10000$

Depreciation will be 2000$

and , book value will be 8000$

Now during second year again depreciation charged is 2000$ hence:

Record Value will be 10000$

Current year Depreciation will be 2000$

and Accumulated Depreciation will be 4000$(2000+2000)

and , book value will be 6000$

Hence proved : Recorded value remain unchanged and book value decreases and accumulated depreciation increases and hence given statement is false.

2) False

Explanation: Expenditure incurred for ordinary maintenance and repair of plant assets are just incurred to restore the asset to its original position , it does not increase the productivity and value of original asset and hence they are not capitalized and instead they are treated as revenue expenses and hence statement given is false.