T/F building and equipment are recorded at cost of acquisition and are subsequently reported at cost less accumulated depreciation
True. Building and equipment are recorded at their cost of acquisition, which includes purchase price, taxes, and other costs necessary to bring them to a usable condition. These assets are then reported on the balance sheet at their cost of acquisition, less any accumulated depreciation.
To arrive at the cost less accumulated depreciation, you need to follow these steps:
1. Determine the initial cost of acquiring the building or equipment. This includes the purchase price, any applicable sales taxes, delivery charges, installation fees, and any other costs directly related to acquiring and preparing the asset for use.
2. Calculate the accumulated depreciation. Depreciation is the systematic allocation of the asset's cost over its expected useful life. You can use different methods such as straight-line depreciation, declining balance method, or units-of-production method to calculate the annual depreciation expense. Multiply the annual depreciation expense by the number of years the asset has been in service to find the accumulated depreciation.
3. Deduct the accumulated depreciation from the initial cost. The result will be the net book value or carrying value of the asset, which is reported on the balance sheet.
It's important to note that the cost less accumulated depreciation approach is based on the historical cost concept, which states that assets should be recorded and reported at their original cost, rather than their current market value.