Which of the following statements is correct regarding a long-lived asset such as a building?Multiple choice question.The original cost in the building account will increase when an adjusting entry is recorded for depreciation.The original cost in the building account will not change when an adjusting entry is recorded for depreciation.The original cost in the building account will decrease when an adjusting entry is recorded for depreciation.The original cost in the building account could increase or decrease when an adjusting entry is recorded for depreciation.
Question
Which of the following statements is correct regarding a long-lived asset such as a building?Multiple choice question.The original cost in the building account will increase when an adjusting entry is recorded for depreciation.The original cost in the building account will not change when an adjusting entry is recorded for depreciation.The original cost in the building account will decrease when an adjusting entry is recorded for depreciation.The original cost in the building account could increase or decrease when an adjusting entry is recorded for depreciation.
Solution
The correct statement regarding a long-lived asset such as a building is: "The original cost in the building account will not change when an adjusting entry is recorded for depreciation."
Here's why:
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When you purchase a long-lived asset like a building, the original cost is recorded in the building account. This cost does not change over time.
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Depreciation is the process of allocating the cost of the building over its useful life. It is an expense that is recorded on the income statement, not a reduction of the asset's cost.
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When an adjusting entry is made for depreciation, it typically involves debiting (increasing) the depreciation expense account and crediting (increasing) the accumulated depreciation account. The accumulated depreciation is a contra asset account that is subtracted from the building's original cost to arrive at its book value. However, the original cost in the building account remains unchanged.
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Therefore, the original cost in the building account will not increase or decrease when an adjusting entry is recorded for depreciation. It remains the same.
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