Chap 7 - Acc 2.

A new major component that is added to an existing asset is considered a(n) ________ and should be capitalized. improvements repairs & maintenance addition

addition

Costs that produce future benefits are ______, but costs that produce benefits only in the current period are ______. a. capitalized; expensed b. current assets; noncurrent assets c.expensed; capitalized d.operating activities; investing activities

capitalized ; expensed

An asset that has no physical substance is called a(n) _____________ asset. intangible tangible

intangible

The formula for calculating declining balance depreciation is the depreciation rate per year times ___________. the cost less the residual value. the book value at the beginning of the year. the cost less the residual value less the accumulated depreciation.

the book value at the beginning of the year.

The depreciable cost is __________. the cost of the asset minus the residual value. cost of the asset minus depreciation expense. cost of the asset plus the residual value. historical cost less accumulated depreciation.

the cost of the asset minus the residual value.

A contractual arrangement in which one entity grants the purchaser the exclusive right to use the trade name, formulas, and product rights within a specific geographic area for a specific period of time is called a ____________. copyright. patent. franchise. trademark.

Franchise

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

The estimated use that the company expects to obtain from the asset before disposing of it.

True or false: The initial cost of property, plant, and equipment includes the purchase price and all expenditures necessary to bring the asset to its desired condition and location for use.

True

In a basket purchase of assets, the cost must be allocated to the individual assets because the assets have different useful lives. goodwill must be expensed immediately. intangible assets must be identified and expensed. some assets must be expensed upon acquisition.

assets have different useful lives

The key factor in classifying items as repairs and maintenance is that__________. a. the asset must be a current asset used in the normal course of business. b. the invoice must be less than $1,000 for productive assets. c. future benefits are not provided beyond those originally anticipated from the asset.

c. future benefits are not provided beyond those originally anticipated from the asset.

Amortization refers to the allocation of the cost of ___________ assets to expense. non-intangible intangible

intangible .

investment? a.Land is used in company's operations b. land is purchased and held until price rises.

land is purchased and held until price rises.

The exclusive legal right to manufacture a product or to use a process is called a(n) ________________. interbrand patent Copyright trademark franchises

patent

The formula for calculating declining balance depreciation is the depreciation rate per year times _____________. the book value at the beginning of the year. the cost less the residual value. the cost less the residual value less the accumulated depreciation.

the book value at the beginning of the year.

Where is the account accumulated depreciation on equipment found on the financial statements? As an asset account on the balance sheet As a liability account on the balance sheet As a contra account to equipment on the balance sheet As an expense account on the income statement

As a contra account to equipment on the balance sheet.

Which statement is true about the straight-line method of depreciation? a. It is the preferred method for companies expecting to use the asset more in its early years of life. b. It recognizes expense proportionately with the amount of use of the asset. c. It allocates an equal amount of depreciation to each year the asset is used. d. It is an accelerated method of depreciation.

It allocates an equal amount of depreciation to each year the asset is used.

Land used in a company's _________ is classified as property, plant and equipment, while land held solely for the expected increase in value is classified as an ___________. Operation ; Investment Capitalized ; Expense

Operation ; Investment

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

Residual Value

A basket purchase or lump-sum acquisition of assets requires that an allocation is made to each individual asset based on the asset's ______. book values relative fair value residual values depreciable values

Residual value

The depreciation method that allocates an equal amount of the depreciable base to each year of the asset's service life is the______. straight-line method. MACRS units-of-output method. double-declining-balance method.

Straight line method

The declining balance method of depreciation is a multiple of the____. straight-line rate of depreciation. earnings rate of the asset. units-of-output depreciation. MACRS depreciation tax rate.

Straight-line rate of depreciation.

Which of the following are classified as natural resources? Timber tracts Land and land improvements Building Mineral deposits

Timber & mineral deposits

An exclusive right to display a word, slogan, symbol, or emblem that distinctively identifies a company, product, or service is referred to as a ________. copyright. patent. trademark. franchise.

Trademark

True or false: Repairs and maintenance expenditures related to an asset do not increase future benefits.

True ; it keeps the asset in working order

The formula for calculating the double-declining-balance method is_________. book value at beginning of the year less residual value x 2/ estimated service life. historical cost less residual value x 2/estimated service life. historical cost x 1/service life. book value at beginning of year x 2/estimated service life

book value at beginning of year x 2/estimated service life.

a ____________ is protected by law and gives the creator of a published work the exclusive rights to reproduce and sell the work for the life of the creator plus 70 years. trademark copyright franchise

copyright

Which of the following items should be capitalized as land improvements? Cost of fences Cost of land Cost of parking lots Cost of sidewalks

cost of fences cost of parking lots cost of sidewalks

Which of the following items are expensed? Major repair that increases future benefits Successful legal defense of a patent Costs related to maintaining equipment Replacing a major component

cost related to maintaining equipment.

_________ is a contractual arrangement in which one entity grants the purchaser the exclusive right to use the trade name, formulas, and product rights within a specific geographic area for a specific period of time. franchise trademark goodwill

franchise

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

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

In a basket or lump-sum purchase of assets, the total acquisition cost is allocated to the individual assets by multiplying the lump-sum purchase price times the relative book value percentages of each asset. the relative fair value percentages of each asset.

the relative fair value percentages of each asset.

When assets are purchased in a group for a single sum, it is referred to as a ______________. group asset divestiture. business consolidation. composite purchase. basket purchase.

Basket purchase

T OR F: Goodwill is an intangible asset that can only be recognized if a company acquires another company. It is valued at the purchase price less the fair value of net assets acquired.

True

Property, land, equipment? a.Land is used in company's operations b. land is purchased and held until price rises.

Land is used in company's operations

For accounting purposes, depreciation is ___________. the selling price of an asset. an allocation of a cost of an asset. a decline in value of an asset.

an allocation of a cost of an asset.

Machines used in manufacturing, computers, printers, vehicles, furniture, and fixtures generally are classified as__________. a. Property b. equipment c. land

equipment

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 net present net realizable fair

Book

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

book value

The formula to calculate an activity-based depreciation rate is: cost/estimated total production. (cost - residual value)/estimated total production. (cost - residual value)/actual production during the year. cost/actual production during the year.

(cost - residual value)/estimated total production.

The term ________ means to record the expenditure as an asset. capitalize accured

capitalize

The formula for straight-line depreciation is ___________. (cost + residual value)/service life. service life/(cost + residual value). cost/service life. (cost - residual value)/service life.

(cost - residual value)/service life.

_______________ is an exclusive right of protection given to a creator of a published work, such as a song, film, painting, photograph, or book. Trademark Franchises Copyright Patent Goodwill

Copyright

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.

If a company replaces a major component of an asset with a new component with the same characteristics of an old component, it is classified as ___________. an addition. repairs and maintenance. a rearrangement. an improvement.

a rearrangement

The formula for calculating the double-declining-balance method is________. book value at beginning of year x 2/estimated service life historical cost less residual value x 2/estimated service life. book value at beginning of the year less residual value x 2/ estimated service life. historical cost x 1/service life.

book value at beginning of year x 2/estimated service life.

In accounting, expenditures recorded as assets are said to be _____. a. expensed b. capitalized c. recognized d. accured

capitalized

An asset that has no physical substance is referred to as a(n) ________. current asset. intangible asset. finite asset. depreciable asset.

intangible asset

Which of the following items typically are classified as equipment? Machinery used in manufacturing Computers and printers used in office Office supplies Machinery held for resale furniture & fixtures

machinery used in manufacturing computers & printers furniture & fixtures

When an asset is no longer useful, but cannot be sold, we have a____________. sale. repairs. retirement.

retirement.

The depreciable cost is___________. cost of the asset plus the residual value. cost of the asset minus depreciation expense. historical cost less accumulated depreciation. the cost of the asset minus the residual value.

the cost of the asset minus the residual value.

Straight-line deprecation is calculated as the depreciable cost divided by __________. the cost of the asset. the estimated service life of the asset. the residual value of the asset.

the estimated service life of the asset.

Which item qualifies as an addition and should be capitalized? a. Performing tasks such as oiling and calibrating to an existing machine. b. Adding a new computer-aided cutting device to an existing machine. c. Replacing the cutting blades on a machine.

Adding a new computer-aided cutting device to an existing machine.

When a company purchases another company and the purchase price is greater than the fair value of the net assets acquired, this excess is referred to as ______. identified intangible assets goodwill restricted intangible assets unidentifiable assets

Goodwill

a _________ is the exclusive right to manufacture a product or use a process granted for a period of 20 Years. copyright trademark patent goodwill

patent

The purchase price and all costs to bring an asset to its desired condition and location for use should be ______. expensed accrued capitalized

capitalized