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Annual depreciation expense

multiplying the book value at the beginning of the year x declining‐balance depreciation rate.

o determine net cash provided by operating activities under a common approach referred to as the indirect method, companies add depreciation and amortization back to

net income.

return on assets

net income/average total assets roa: never is allowed tasty apples :(

profit margin

net income/net sales pro mascots ni/ns need interesting nail shapes?

Asset Turnover

net sales/average total assets AT: ns/ata a turnover never stays at the apartment bc ppl eat it?

When a company incurs costs in connection with the acquisition of the franchise or license, it should recognize an intangible asset.

ompanies record as operating expenses annual payments made under a franchise agreement in the period in which they are incurred. In the case of a limited life, a company amortizes the cost of a franchise (or license) as operating expense over the useful life. If the life is indefinite or perpetual, the cost is not amortized.

When a change in an estimate is required, the company makes the change in current and future years but not to

prior periods.

return on assets can also be caluculated w

profit margin x asset turnover roa please make a turnover

Plant assets are the

property, plant, and equipment (physical assets) that commonly come to mind when we think of what a company owns.

As the name implies, under units‐of‐activity depreciation, the amount of depreciation is

proportional to the activity that took place during that period.

An overall measure of profitability is the

return on assets.

If a cost is not included in a plant asset account, then it must be expensed immediately. Such costs are referred to as

revenue expenditures.

Overland Trucking has an old truck that cost $30,000 and has accumulated depreciation of $16,000. Assume two different situations: The company sells the old truck for $17,000 cash. The truck is worthless, so the company simply retires it. What entry should Overland use to record each scenario?

sale of truck: cash 17,000 accumulated depreciation-equipment 16,000 cr. equipment 30,000 cr. gain on disposal of plant assets 3000 retirement of truck: accumulated depreciation 16,000 loss on disposal of plant assets 14000 equipment 30,000

Unlike other depreciation methods, the declining‐balance method ignores _____ in determining the amount to which the declining‐balance rate is applied.

salvage value

three methods

straight line, declining balance, units of activity

When a plant asset is fully depreciated, the plant asset and related accumulated depreciation should continue to be reported on the balance sheet without further depreciation or adjustment until

the asset is retired.

(finding cost) The cash equivalent price is equal to

the fair value of the asset given up or the fair value of the asset received, whichever is more clearly determinable.

if a company wants to increase its return on assets, it can do so in two ways:

(1) by increasing the margin it generates from each dollar of goods that it sells (the profit margin), or (2) by increasing the volume of goods that it sells (the asset turnover).

depreciation expense =

(cost-salvage value)/ useful life csu douglas, em went to csu

Match the statement with the term most directly associated with it. Copyright Intangible assets Research and development costs Amortization Franchise 1_______ The allocation to expense of the cost of an intangible asset over the asset's useful life. 2_______ Rights, privileges, and competitive advantages that result from the ownership of long‐lived assets that do not possess physical substance. 3_______ An exclusive right granted by the federal government to reproduce and sell an artistic or published work. 4_______ A right to sell certain products or services or to use certain trademarks or trade names within a designated geographic area. 5_______ Costs incurred by a company that often lead to patents or new products. These costs must be expensed as incurred.

1. amortization 2. intangible assets 3. copyright 4. franchise 5.research and development costs

Usually, the largest intangible asset that appears on a company's balance sheet is goodwill. Goodwill represents the value of all favorable attributes that relate to a company that are not attributable to any other specific asset. These include exceptional management, desirable location, good customer relations, skilled employees, high‐quality products, fair pricing policies, and harmonious relations with labor unions. Goodwill is unique because unlike other assets such as investments, plant assets, and even other intangibles, which can be sold individually in the marketplace, goodwill can be identified only with the business as a whole.

:)))

To record amortization of an intangible asset, a company increases (debits) ____ and decreases (credits) ___

Amortization Expense; the specific intangible asset.

__ consists of all expenditures necessary to acquire an asset and make it ready for its intended use.

Cost

Bill's expects to be able to drive the truck a total of 100,000 miles for 5 years.. (purchased on jan 1 2017) Bill's Pizzas decides at the end of 2020 (prior to the year‐end adjusting entries) to extend the estimated useful life of the truck one year (a total life of six years) and increase its salvage value to $2,200. The company has used the straight‐line method to depreciate the asset to date.

Depreciation per year was $2,400 Accumulated depreciation after three years (2017-2019) is $7,200 ?>.....

Intangibles may arise from the following sources:

Government grants, such as patents, copyrights, licenses, trademarks, and trade names. Acquisition of another business in which the purchase price includes a payment for goodwill. Private monopolistic arrangements arising from contractual agreements, such as franchises and leases.

Wright records the sale and the gain on sale of the plant asset as follows.

July 1) Cash 16,000 accumulated depreciation-equipment 49,000 cr. equipment 60,000 cr. Gain on disposal of plant assets 5,000

on July 1, 2017, Wright Company sells office furniture for $16,000 cash. The office furniture originally cost $60,000 and as of January 1, 2017, had accumulated depreciation of $41,000. Depreciation for the first six months of 2017 is $8,000. Wright records depreciation expense and updates accumulated depreciation to July 1 as follows. Wright Company has a gain on disposal of

July 1) Depreciation expense 8000 accumulated depreciation-equipment 8000 cost of office furniture: 60,000 less: accumulated depreciation: 49,000 book value at date of disposal: 11,000 proceeds from sale: 16,000 Gain on disposal of asset= $5,000

Chambers Corporation purchased a piece of equipment for $36,000. It estimated a 6‐year life and $6,000 salvage value. Thus, straight‐line depreciation was $5,000 per year [($36,000−$6,000)÷6] . At the end of year three (before the depreciation adjustment), it estimated the new total life to be 10 years and the new salvage value to be $2,000. Compute the revised depreciation.

Original depreciation: 5000 accumulate depreciation: 10,000 book value= 36,000-10,000= 26,000 book value after two years of depreciation 26,000 less: New salvage value 2000 depreciable cost 24,000 remaining useful life 8 revised annual depreciation 3000

The cost of intangible assets with indefinite lives should not be amortized.

T

The depreciation rate remains constant from year to year, but the book value to which the rate is applied declines each year.

T

To determine the new annual depreciation expense, the company first computes the asset's depreciable cost at the time of the revision. It then allocates the revised depreciable cost to the remaining useful life.

T

the book value of plant assets is rarely the same as the fair value.

T

units‐of‐activity method, useful life is expressed in terms of the total units of production or use expected from the asset.

T

If an intangible has a limited life, the company allocates its cost over the asset's useful life using a process similar to depreciation.

T; The process of allocating to expense the cost of intangibles is referred to as amortization.

Because the declining‐balance method produces higher depreciation expense in the early years than in the later years, it is considered an

accelerated‐depreciation method.

The cost of the copyright consists of the cost of

acquiring and defending it. The useful life of a copyright generally is significantly shorter than its legal life.

To illustrate the computation of patent amortization, assume that National Labs purchases a patent at a cost of $60,000 on June 30. If National estimates the useful life of the patent to be eight years, the annual amortization expense is $7,500($60,000÷8)per year . National records $3,750($7,500×6/12) of amortization for the six‐month period ended December 31 as follows.

amortization expense 3750 patents 3750

If a company purchases the trademark or trade name, the cost is the purchase price. If the company develops the trademark or trade name itself, the cost includes attorney's fees, registration fees, design costs, successful legal defense costs, and other expenditures directly related to securing it. Because trademarks and trade names have indefinite lives, they are not

amortized. coca cola is forever :)

Paramour Company reported net income of $180,000, net sales of $420,000, and had total assets of $460,000 on January 1, 2017, and total assets on December 31, 2017, of $540,000. Determine Paramour's asset turnover for 2017.

asset turnover: a turnover ns a t a 420,000/average total assets 500,000 =.84

Companies amortize the cost of a patent over its 20‐year life or its useful life, whichever is shorter.

ay

On the other hand, costs that are not expensed immediately but are instead included in a plant asset account are referred to as

capital expenditures. put a cap on the plant ?

Assume that instead of selling the office furniture for $16,000, Wright sells it for $9,000. In this case, Wright experiences a loss of $2,000, how would u make this journal entry?

cash 9000 accumulate depreciation-equipment 49,000 loss on disposal of plant assets 2000 cr. equipment 60,000

If the owner incurs legal costs in successfully defending the patent in an infringement suit, such costs are considered necessary to establish the validity of the patent. Thus, the owner adds those costs to the Patents account and amortizes them over the remaining life of the patent.

cool so the legal costs are part of patent cost nice

book value is the difference between the

cost of the plant asset and the accumulated depreciation to date. bv= plant / ad black violets planted ArounD

Assume that Drummond Corp. purchases a delivery truck for $15,000 cash plus sales taxes of $900 and delivery costs of $500. The buyer also pays $200 for painting and lettering, $600 for an annual insurance policy, and $80 for a motor vehicle license. Explain how the company should account for each of these costs.

cost of truck= 15,000+900+500+200 = 16,600 insurance and license are separate ~

The _____ computes depreciation expense using a constant rate applied to a declining book value. This method is called an ____ because it results in higher depreciation in the early years of an asset's life than does the straight‐line approach.

declining‐balance method ; accelerated‐depreciation method

Companies record retirement of an asset as a special case of a disposal where no cash is received. They

decrease (debit) Accumulated Depreciation for the full amount of depreciation taken over the life of the asset and decrease (credit) the asset account for the original cost of the asset.

he declining‐balance method produces a ____ annual depreciation expense over the useful life of the asset.

decreasing based on a declining book value (cost less accumulated depreciation)

book value at beginning of year x declining-balance rate

depreciation expense

On January 1, 2017, Iron Mountain Ski Corporation purchased a new snow‐grooming machine for $50,000. The machine is estimated to have a 10‐year life with a $2,000 salvage value. What journal entry would Iron Mountain Ski Corporation make at December 31, 2017, if it uses the straight‐line method of depreciation?

depreciation expense is (50,000-2000) / 10 = 4800 depreciation expense 4800 accumulated depreciation- equipment 4800

the practice of timing the recognition of gains and losses to achieve certain income results is known as

earnings management.

Therefore, companies record goodwill only when there is an exchange transaction that involves the purchase of an entire business. When an entire business is purchased, goodwill is the

excess of cost/the fair value of the net assets (assets less liabilities) acquired. ec/a-l ecal good elephants can alwaays laughhh Goodwill is not amortized because it is considered to have an indefinite life.

companies usually record research and development costs as an ____ when incurred, whether the R&D is successful or not.

expense

A ____ is a contractual arrangement under which the franchisor grants the franchisee the right to sell certain products, to perform specific services, or to use certain trademarks or trade names, usually within a designated geographic area.

franchise

f the proceeds from the sale exceed the book value of the plant asset, a __ on disposal occurs.

gain

A permanent decline in the fair value of an asset is referred to as an

impairment.

Intangible assets, such as copyrights and patents,

lack physical substance but can be extremely valuable and vital to a company's success.

Under the___ method, useful life is expressed in terms of the total units of production or the use expected from the asset.

units‐of‐activity