ACCT CH 7
The residual value of an intangible asset is usually _______
zero
Intangible assets are categorized as those with finite lives and those with __________ lives.
indefinite
Goodwill and some trademarks are examples of intangible assets that are assumed to a have a(n) _______ life.
infinite
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.
The residual value of an intangible asset is usually
zero
The journal entry to record the amortization for a patent would include a debit to _________ ________ and credit to ________ .
amortization ; expense ; patent
Otto Inc. retires old equipment with a book value of $2,400. Otto should
recognize a loss of $2,400
The amortization of an intangible asset occurs over the period of time that is the ______ of the legal, regulatory, contractual, or service life.
shorter
Most companies use __________ ___________ amortization for intangible assets.
straight;line
An intangible asset that is measured as the purchase price less the fair value of the net identifiable assets is called
goodwill
The gain or loss on disposal of an asset is calculated as:
amount received less the book value of asset sold
No amortization is recorded for
intangible assets with indefinite lives.
The two categories for intangible assets are
intangibles with finite lives. intangibles with indefinite lives.
The method of amortization used for intangible assets
is most commonly straight-line.
Smith Company acquires a franchise from West Corp for $200,000. The franchise agreement covers a period of 10 years. Compute amortization expense for the second year.
$200,000/10 years = $20,000 per year
The journal entry to retire old equipment that is not fully depreciated includes a:
debit to accumulated depreciation credit to equipment debit to loss
Gerhard Inc. recognizes goodwill related to the acquisition of another company. Gerhard should:
-capitalize the goodwill when company is acquired -periodically test goodwill for impairment
1)Depreciation 2)Amortization
1)Property, plant, and equipment 2)Intangible assets
True or false: Goodwill acquired in a business combination is amortized over its estimated service life.
False
Which of the following intangible assets are usually considered to have indefinite lives?
Trademarks Goodwill
Allocating the cost of intangible assets to expense is referred to as
amortization
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 journal entry to record the amortization of an intangible asset includes
debit to amortization expense. and credit to the intangible asset.
Amortization refers to the allocation of the cost of ___________ assets to expense.
intangible
When an asset is no longer useful, but cannot be sold, we have a
retirement
When an asset is no longer useful, but cannot be sold, we have a _______
retirement
On December 30, 20X1, Glaze Corp. disposed of equipment with a historical cost of $50,000 and accumulated depreciation of $30,000. The equipment was sold for $10,000 cash. The journal entry to record the sale will include which of the following entries?
Credit to equipment $50,000 Debit to cash $10,000 Debit to accumulated depreciation $30,000 Debit to loss on sale of asset $10,000
On December 30, 20X1, Glaze Corp. disposed of equipment with a historical cost of $50,000 and accumulated depreciation of $30,000. The equipment was sold for $45,000 cash. The journal entry to record the sale will include which of the following entries?
Credit to gain on sale of asset $25,000 Credit to equipment $50,000 Debit to cash $45,000 Debit to accumulated depreciation $30,000
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 accumulated depreciation $60,000 Credit gain on exchange of asset $40,000 Debit equipment $80,000 Credit equipment $100,000
On December 30, 20X1, Rocket Corp. disposed of equipment with a historical cost of $100,000 and accumulated depreciation of $70,000. The equipment was sold for $80,000 cash. The journal entry to record the sale will include which of the following entries?
Debit accumulated depreciation $70,000 Credit gain on sale of equipment $50,000 Credit equipment $100,000 Debit cash $80,000
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 equipment $40,000 Debit loss on exchange $10,000 Credit equipment $90,000 Debit accumulated depreciation $40,000
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?
Debit equipment $50,000 Credit gain on exchange of asset $30,000 Credit equipment $90,000 Debit accumulated depreciation $70,000
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
On December 30, 20X1, Brighton Corp. disposed of equipment with a historical cost of $150,000 and accumulated depreciation of $60,000. The equipment was sold for $70,000 cash. The journal entry to record the sale will include which of the following?
Debit loss on sale of equipment $20,000 Debit cash $70,000 Credit equipment $150,000 Debit accumulated depreciation $60,000
The service life of an intangible asset may be limited by what types of provisions?
Legal Regulatory Contractual
Monet Company purchased a patent with an estimated service life of ten years for $200,000 After three years of amortizing the patent using the straight-line method, Monet estimates that the remaining useful life is only 5 years. Amortization expense for the fourth year is:
[200K = (200K/10)*3] = 140k; 140K/5 = $28K
The cost allocation for property, plant, and equipment is referred to as ____________ while the cost allocation for intangible assets is referred to as _____________
depreciation ; amortization
When a company acquires a business in a business acquisition and the purchase price is greater than the fair value of the net assets acquired, the excess is reported as
goodwill
When a company acquires a business in a business acquisition and the purchase price is greater than the fair value of the net assets acquired, the excess is reported as _____________
goodwill
Intangible assets with indefinite useful lives should
not be amortized.