Chapter 11 SmartBook

The cost of a natural resource less its anticipated residual value is called the _____ _____.

depletion base

On October 1, year 1, Kirby Corp. purchased equipment for $100,000. The equipment has a useful life of 5 years with no residual value. Kirby uses the straight-line method of depreciation. The partial year depreciation for year 1 is

$5,000

The gain or loss on disposal of an asset is calculated as

consideration received less the book value of asset sold.

The allocation of the cost of a tangible fixed asset is referred to as _____, whereas the allocation of the cost of an intangible asset is referred to as _____.

depreciation amortization

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.

On October 1, year 1, Johnson Corp. purchased equipment for $100,000. The equipment has a useful life of 5 years with no residual value. Johnson uses the double-declining-balance method of depreciation. The partial year depreciation for year 1 is Multiple choice question.

$10,000

What is the purpose of group or composite depreciation?

To reduce the record-keeping costs of determining depreciation.

The allocation of the cost of an intangible asset over its useful life is called

amortization.

No amortization is recorded for

intangible assets with indefinite lives.

Amortization is appropriate for intangible assets with

finite useful lives

Which of the following accounting changes must be justified in the notes to the financial statements?

Changes in depreciation methods

Which of the following terms is equivalent to an asset's useful life to a particular company?

Service life

Which of the following is an activity-based depreciation method?

Units-of-production method

If obsolescence were expected to limit the longevity of a protected product, the useful life of a patent might be _________ its legal life.

less than

Group and composite depreciation commonly is used to

reduce costs of record-keeping.

Depreciation <<<--->>> Allocation of the cost of a tangible fixed asset

Depletion <<<--->>> Allocation of the cost of natural resources

Which statement is true about the straight-line method of depreciation?

It allocates an equal amount of depreciation to each year of the asset's service life.

Which of the following intangible assets are usually considered to have indefinite lives?

Trademarks

When selling a fixed asset, the seller recognizes a gain or loss for the difference between the consideration received and the ______ value of the asset sold.

book

For natural resources the depletion base is

cost less any anticipated residual value.

Which items are considered changes in estimates that would be treated on a prospective basis in the current period and future periods? (Select all that apply.)

increasing the residual value of an asset change in useful life of an asset

The two categories for intangible assets are

intangibles with indefinite lives. intangibles with finite lives.

The useful life of an intangible asset may be limited by what type of provisions? (Select all that apply.)

legal regulatory contractual

The service life or useful life of an asset is

the amount of use the company expects to obtain before disposing of the asset.

If a company bases depreciation expense on the life of a machine in hours, and depreciates the machine for the number of hours used during the year, it is using the ______ method of depreciation.

units-of-production