Chapter 7 problem session exerciseproblem i: indicate whether each of the following statements is true (t) or false (f).

a. the cost of an intangible asset, such as a patent or goodwill, should be capitalized regardless of whether the intangible asset was purchased or created internally by the company.
b. land is not subject to depreciation while land improvements are subject to depreciation.
c. the allocation of cost of a natural resource is called amortization.
d. all purchased intangible assets are subject to amortization.
e. the accounting definition of depreciation refers to the decrease in an operating asset’s fair market value over its useful life.
f. the process of recording depreciation is an application of the matching principle.
g. the balance in the "accumulated depreciation" account should be reported on the income statement.
h. as an asset is depreciated, its book value will decrease.
i. regardless of the depreciation method used, the book value of a depreciable asset at the end of its useful life should be equal to its residual (or salvage) value.
j. regardless of the depreciation method used, the accumulated depreciation balance at the end of an asset’s useful life should be equal to its depreciable cost which is calculated by taking the difference between its cost and residual value.
k. the gain or loss on the disposal of a long-term asset can be determined by comparing the asset’s book value to the fair market value received (ex. cash received).
l. all else being equal, if wolfpack company has a higher return on assets than tarheel inc., wolfpack is using its operating assets more effectively than tarheel.
the return on assets ratio can be separated into two components, profit margin and asset turnover, in order to provide a better analysis of what is driving the ratio.
n. a company may use a depreciation method for tax purposes which is different than the one ituses for financial statement purposes.
o. a machine might be considered as being impaired if the estimated future cash flows it is expected to generate are less than its book value.
p. the recording of an impairment loss will reduce a company’s net income as well as its total assets balance.