Final answer:
A company's balance sheet reports plant assets at their original cost, not by subtracting salvage value. Depreciation over the asset's useful life is used to account for value declines, and the salvage value is considered when calculating depreciation.
Step-by-step explanation:
False. On its balance sheet, a company does not report plant assets by subtracting salvage value from the original cost. Instead, plant assets are reported at their original cost and are later depreciated over their useful life.
The salvage value is an estimated amount expected to be received at the end of an asset's useful life and is used to calculate depreciation, not to report the value of the asset on the balance sheet.
Depreciation is the process of allocating the cost of a tangible asset over its useful life and is used to account for declines in value over time. The value of the asset after depreciation, but not below the salvage value, is what appears on the balance sheet.
When preparing a T-account, the left side represents assets and the right side represents liabilities and net worth. In a T-account, assets will always equal liabilities plus net worth, which reflects the fundamental accounting equation:
Assets = Liabilities + Equity.