A201 Chapter 8 (2)

If a cost is capitalized, it is recorded as a(n) __________, not an expense.

asset

An asset's useful life __________.

can be expressed in either years or units; is the asset's expected economic life to its owners

The old Metropolitan Theater, which has been unused for years, was purchased for $1, renovated at a cost of $3.5 million, and then reopened for business. The renovation cost should be _________.

capitalized as part of the cost of the theater

Sunny Skys, Inc. bought a derelict hunting lodge, which it tore down at a cost of $45,000 and replaced with a new lodge. The demolition should be _________.

capitalized. b/c the costs are necessary to get the asset in place and ready for its intended use.

Why can depreciation expense be a different amount each year using the units-of-production method?

the method calculates expense based on the relationship between each year's output and total estimated output.

Depreciation expense is an estimate because it is based on the asset's estimated _________ __________ and __________ value.

useful life; residual (salvage)

Declining balance depreciation methods are also called _________ depreciation methods.

accelerated

Depreciable costs:

cost - residual (salvage) value

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

depreciation

The "least and latest rule is _________.

that a taxpayer should pay the lest tax legally permitted at the latest date allowed.

A productive asset:

is used to produce goods or services that will be sold to customers.

Gains on the sale of fixed assets are recorded with a credit and occur when the book value is _________ than the sales price.

lower

The estimated output used to calculate depreciation expense will often differ from the actual output. The proper accounting for any difference is to __________.

make the final adjusting entry to depreciation expense be such that the net book value equals the residual value

The straight-line depreciation method _________.

reports an equal amount of depreciation expense each year