Multiple Choice
A classified balance sheet ______.
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2. Transaction Analysis
Classified Balance Sheet Components
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On a classified balance sheet, what is the net amount of property, plant, and equipment (PP&E) reported as?
A
The sum of all current and noncurrent assets
B
The fair market value of PP&E at the reporting date
C
The replacement cost of PP&E
D
The historical cost of PP&E minus accumulated depreciation
Verified step by step guidance1
Understand that property, plant, and equipment (PP&E) are long-term tangible assets used in the operations of a business, such as buildings, machinery, and equipment.
Recognize that on a classified balance sheet, PP&E is reported at its net amount, which is calculated as the historical cost of the assets minus accumulated depreciation.
Historical cost refers to the original purchase price of the asset, including any costs necessary to bring the asset to its intended use, such as transportation or installation costs.
Accumulated depreciation represents the total depreciation expense that has been recorded over time for the asset, reflecting the wear and tear or usage of the asset.
To calculate the net amount of PP&E, subtract the accumulated depreciation from the historical cost of the asset using the formula: .
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