ACC CH 7 learnsmart

The formula to calculate an activity-based depreciation rate is:

(cost-residual value)/estimated total production

Declining balance

-accelerated method (more deprecation expense is taken in earlier years) -used in tax purposes

The depreciation method that allocated an equal amount of the depreciable base to each year of the asset's service life is the

straight line ( asset used evenly, easiest method,)

The formula for calculating declining balance depreciation is the depreciation rate per year times

the book value at the beginning of the year.

The journal entry to retire old equipment that is not fully depreciated includes a:

-debit to loss -credit to equipment -debit to accumulated depreciation

the purchase price and all costs to bring an asset to its desired condition and location for use should be _____ -accrued -expensed -capitalized

capitalize (record an expenditure as an asset)

The formula to calculate the depreciation for the units-of-production method (activity-based depreciation) is ((cost - residual value)/total estimated production) x ______. -total activity or production -current-year activity or production -gross profit percentage -historical cost

current-year activity or production

(Sleect all that apply) The types of expenditures that can occur subsequent to an asset's acquisition are -repairs and maintenece -goodwill -additions -improvements

-repairs and maintence -additions -improvements -litigation costs

Other terms used for an activity-based depreciation method are:

-units of output method -units of production method

depreciation expense formula (stright line)

=(asset's cost - residual value)/(Service life) =(Depreciable cost)/(service life)

depreciable cost equation

Depreciable cost = asset cost - est. residual value

Otto Inc. retires old equipment with a book value of $2,400. Otto should (one correct answer) debit cash for $2,400 recognize a gain of $2,400 not make a journal entry recognize a loss of $2,400

recognize a loss of $2,400

straight line depreciation is calculated as the depreciable cost divided by the

estimated service life of the asset

When an asset has a significant decline in value and is written down, this is called______ . (Enter one word per blank)

impairment

Amortization refers to the allocation of the cost of____ assets to expenses.

intangible

The profit margin ratio is defined as ____ ______ divided by net sales

net income

Which depreciation methods allocate the cost of long-term assets based on time?

-activity methods -declining-balance

Total depreciation recorded over an asset's service life is: -highest when the double-declining balance method is used -lowest when the activity-based method is used -lowest when the straight method is used -the same regardless of the depreciation method used

the same regardless

which of the following does NOT differ among the different depreciation methods? - depreciation recognized during the last year of the asset's service life- total depreciation recognized over the asset's service life- depreciation recognized during the earlier years

total depreciation recognized over the asset's service life

depreciable cost represents

total depreciation to be taken over the asset's useful life

Both declining-balance and straight-line will result in the same total depreciation over the asset's service life

true : no matter what allocation method is used, total depreciation over the asset's service life will be equal to the depreciable cost (asset cost - residual value)

The formula for calculating the double-declining-balance method is

Double-declining depreciation rate= 2/ Estimated service life answer: ("Book value at beginning of year x2 / estimated service life)

What is the formula for the profit margin ratio? Net income divided by average shareholders' equity. Gross profit divided by sales. Net income divided by average total assets. Net income divided by net sales.

Net income divided by net sales

A retirement or abandonment of an asset is different from a sale of an asset because

-no cash is received -a loss must be recognized for the remaining book value

Krasel Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $90,000, and its accumulated depreciation at the date of exchange was $70,000. The new asset received had a fair value of $50,000 and a book value of $45,000. The journal entry to record this exchange will include which of the following entries? Credit equipment $90,000 Credit accumulated depreciation $70,000 Credit equipment $70,000 Debit equipment $50,000 Credit gain on exchange of asset $30,000 Debit equipment $45,000 Debit accumulated depreciation $70,000

Credit equipment $90,000 Debit equipment $50,000 Credit gain on exchange of asset $30,000 Debit accumulated depreciation $70,000

Wall Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $100,000, and its accumulated depreciation at the date of exchange was $60,000. The new asset received had a fair value of $80,000 and a book value of $65,000. The journal entry to record this exchange will include which of the following entries? Debit equipment $80,000 Credit equipment $80,000 Credit accumulated depreciation $60,000 Debit accumulated depreciation $60,000 Credit gain on exchange of asset $40,000 Credit equipment $100,000 Debit equipment $65,000 Confidence Level Rate your confidence to submit your answer.

Debit equipment $80,000 Debit accumulated depreciation $60,000 Credit gain on exchange of asset $40,000 Credit equipment $100,000

Units of production or units of output are alternative terms for the ________ - _______ depreciation method

activity based

depletion

allocation of the cost of natural resources

Allocating the cost of intangible assets to expense is referred to as _______.

amortization

The gain or loss on disposal of an asset is calculated as:

amount received less the book value of asset sold

For accounting purposes, depreciation is

an allocation of a cost of an asset

Activity based method

calculates depreciation based on the use/activity of the asset ( miles) -used for cost of natural resources

The original cost of the asset less the accumulated depreciation is the _______ _______ of the asset

book value

Pearce Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $120,000, and its accumulated depreciation at the date of exchange was $40,000. The new equipment received had a fair value of $50,000 and a book value of $32,000. The journal entry to record this exchange will include which of the following entries?

-Debit equipment $50,000 -Debit loss on exchange $30,000 -Credit equipment $120,000 -Debit accumulated depreciation $40,000

Cheng Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $90,000, and its accumulated depreciation at the date of exchange was $40,000. The new equipment received had a fair value of $40,000 and a book value of $35,000. The journal entry to record this exchange will include which of the following entries?

Debit loss on exchange $10,000 Debit equipment $40,000 Credit equipment $90,000 Debit accumulated depreciation $40,000

In accounting, the term impairment refers to

an assets significant decline in value

Straight-line method equation

asset's cost-estimated residual value

When selling a fixed asset, the seller recognizes a gain or loss for the difference between the amount received and the ______ value of the asset sold.

book

The original cost of an asset minus accumulated depreciation is -residual value -goodwill -book value -disposal value

book value

Straight, declining balance, activity-based refer to methods commonly used to ______ property

depreciate

The allocation of the cost of tangible asset over its service life is referred to as ______

depreciation

Term used to describe the amount the company expects to receive for an asset at the end of its service life is -residual value -impairment value -historical cost -lower of cost or market value

residual value

-Depreciation method:

the pattern in each the assets depreciable cost (org cost-residual value) is allocated over time

Straight line and declining balance methods allocate the cost of a long-term asset based on _____ while an activity-based method allocates the cost of an asset based on its ____

time; use

When an asset is no longer useful, but cannot be sold, we have a

retirement

Which are commonly used depreciation methods? -activity based -stright line -declining -balance -value-based

stright line declining balance activity based

The service life or useful life of an asset is -the estimated use that the company expected to obtain from the asset before disposing of it -determined by MACRS tables -the time period from the purchase of the asset until it becomes impaired

the estimated use that the company expected to obtain from the asset before disposing of it