E10-4 Chris Rock has prepared the following list of statements about depreciation.

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E10-4 Chris Rock has prepared the following list of statements about depreciation.

1. Depreciation is a process of asset valuation, not cost allocation.

2. Depreciation provides for the proper matching of expenses with revenues.

3. The book value of a plant asset should approximate its market value.

4. Depreciation applies to three classes of plant assets: land, buildings, and equipment.

5. Depreciation does not apply to a building because its usefulness and revenue-producing ability

generally remain intact over time.

6. The revenue-producing ability of a depreciable asset will decline due to wear and tear and to

obsolescence.

7. Recognizing depreciation on an asset results in an accumulation of cash for replacement of

the asset.

8. The balance in accumulated depreciation represents the total cost that has been charged to

expense.

9. Depreciation expense and accumulated depreciation are reported on the income statement.

10. Four factors affect the computation of depreciation: cost, useful life, salvage value, and residual

value.

Instructions

Identify each statement as true or false. If false, indicate how to correct the statement.