Chapter 5
The term used to describe the amount the company expects to receive for an asset at the end of its service life is
residual value.
The inventory costing method that matches each unit of inventory with its actual cost is referred to as the _____ method.
specific identification
Straight-line deprecation is calculated as the depreciable cost divided by
the estimated service life of the asset.
An estimated residual value _________ the total amount of depreciation recorded over an asset's service life.
reduces
The formula for straight-line depreciation is
(cost - residual value)/service life.
Match each depreciation method to the explanation.
Active Based - Method that matches usage of the asset with revenues generated from the asset. Straight-line method - Allocates an equal portion of the depreciable base to each year of the asset's service life. Declining-balance method - Accelerated method that multiplies a constant percentage rate times the decreasing book value.
Match each term with its definition.
Depreciation - Allocation of the cost of a tangible fixed asset. Depletion - Allocation of the cost of natural resources. Amortization - Allocation of the cost of an intangible asset
An asset __________ occurs when an asset is no longer useful, but cannot be sold.
Retire
How is income tax reported on a multiple-step income statement?
Separately after non-operating revenues and expenses
The gain or loss on sale of an asset is calculated as
amount received less the book value of asset sold
When selling a fixed asset, the seller recognizes a gain or loss for the difference between the amount received and the
book
The original cost of the asset less the accumulated depreciation is the
book, value
Which of the following items are included in calculating operating income?
General and administrative expenses Utility expense Cost of goods sold
An asset that is traded for another asset is treated as a(n) whereas an asset that is sold or retired is treated as a disposition
exchange
The specific identification method
matches each unit of inventory with its actual cost would be beneficial to a company that makes fine jewelry
A retirement or abandonment of an asset is different from a sale of an asset because
no cash is received. a loss must be recognized for the remaining book value.