Chapter 8

units of production depreciation formula

Is the method that allocates the cost of an asset over its useful life based on the relation of it periodic output to its total estimated output. Depreciation Expense = ((Cost - Residual Value) / Estimated total production) x Actual Production

if a cost is capitalized, it is recorded as an ___, not an expense

asset

which financial statements shows tangible assets

balance sheet

the old theater which had been unused for years, was purchased for $1, renovated at cost of 3.5 million, then reopened for business. the renovation cost should be ___

capitalized as part of the cost of the theater

straight - line depreciation

does the best job of matching the expense with the related revenue when an asset is used evenly over its useful life

the straight line depreciation method

reports an equal amount of depreciation expense each year

another term for residual value is ___ value

salvage

A gain on the disposal of an asset occurs when the

selling price is greater than the assets book value

what is the effect of recording depreciation expense on the accounting equation?

total assets and OE decreases

delivery truck 30,000 4 years sold 6000 double declining balance =

(cost - acc deprec) x 2/UL (30,000 - 0) x 2/4 =15000 6000 sold = residual

straight line depreciation formula

(cost - residual value) x (1/useful life) = depreciation expense

company amortizes it patent over ten years. write the journal entry

debit amortization expense credit patents (ACC DEP)

the write-down due to impairment will cause ___

intangible assets and net income to decrease

Company amortizes its patent of $20,000 over 20 years. The adjusting entry to record is..

decrease assets and net income expense x patents x

in accordance with the expense principle, the term __ describes the process of expensing natural resource's cost in the period related revenues are earned

depletion

Matching part of the cost a long-lived asset with revenues generated by the asset is

depreciation

straight line, units of production, and decling balance are commonly used __ methods

depreciation

the declining-balance depreciation method assigns a ___ depreciation expense to the early years of asset ownership

higher

A company might record an involuntary disposal of an asset ___________

if the asset was seriously damanged in a fire

depreciation and impairment are different in that only __

impairment represents in the current value of the related asset

declining-balance depreciation

is the best method to use when an asset is productive in its earliest years but quickly loses its usefulness

units of production depreciation

is the best method to use when the amount of an asset's use varies significantly from one accounting period to another

gains on the sale of fixed assets are recorded with a CREDIT and occur when the book value is___ than the sales price

lower

an intangible asset may be recorded only if ___

purchased

an impairment loss is an ___

reduction to net income on the income statement

the assets book value must equal its residual value at the end of its useful like using which depreciation method?

straight-line, double-declining balance, units of production

what are the two major types of long-lived assets

tangible and intangible assets