chapter 7

If a company generates its own goodwill through advertising or training, how should these costs be treated?

Expense the costs as incurred.

For accounting purposes, depreciation is

an allocation of a cost of an asset.

building a neon sign for advertisement is what type of expenditure

equipment

replacing heating equipment is what type of expediture

equipment

natural resources

mineral deposits and timber tracts

book value

cost - accumulated depreciation

devaluation of a tangible object

depriciation

a patent gives one the

executive right to produce an idem for 20 years

True or false: Depreciation is a valuation method for property and equipment.

false

s reported by the acquiring company for the amount that the purchase price exceeds the fair value of the acquired company's identifiable net assets.

goodwill

Which of the following are expenditures for assets subsequent to acquisition?

improvements repairs and Maintenace additions

Goodwill may only be recognized

in a business acquisition.

goodwill is often the largest

intangible asset

Assets with no physical form are​ ________.

intangible assets

Intangible assets that are acquired from other entities are referred to as purchased intangibles, whereas intangibles that are created by a company are referred to as

internally developed intangibles

research and development costs as well as advertising costs are documented on the income statement as

expenses

the cost of major improvements that extend the service life of an asset would be_________________, whereas the cost of maintenance that does not increase the future benefits would be __________________

1. capitalized 2. expensed

a copyright is

An exclusive right of protection given to the creator of a published work such as a song, film, painting, photograph, book, or computer software

Where is the account accumulated depreciation on equipment found on the financial statements?

As a contra account to equipment on the balance sheet

Larry purchases land to be used for a new corporate headquarters. Which of the following items are capitalized in the cost of land?

Costs to remove an old building Grading the land Title insurance Legal fees to secure title

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

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

Which of the following costs should be capitalized in the costs of acquiring a building?

Remodeling building Realtor commissions Legal fees to obtain title ex

Which of the following items should be capitalized in the cost of equipment?

Sales tax Installation and testing of equipment Freight to deliver the equipment Legal fees to establish title

Which account is credited in a journal entry to record depreciation on machinery

accumulated depreciation

Attorney fees and other costs necessary to secure a patent should be

added to the patent account

Depreciation is a process of cost _________________

allocation

devaluation of an intangible asset

amortization

When assets are purchased in a group for a single sum, it is referred to as a

basket purchase

Recording depreciation results in the allocation of the cost of a long-term asset to the years during which the asset provides

benifits

covering a patio of a restaurant is what type of expenditure.

building

goodwill is recognized only when one company

buys another

The purchase price and all costs to bring an asset to its desired condition and location for use should be

capitalized

journal entry to record depreciation?

debit depreciation expense, credit accumulated depreciation

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

franchise

the key factor in classifying items as repairs and maintenance is that

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

The distinction between land and land improvements is that:

land has indefinite life

Long-term tangible assets include

land, equipment, buildings

Goodwill is recorded when

one company acquires another company.

the value of purchased assets is recorded at.

original cost

The exclusive legal right to manufacture a product or to use a process is called a

patent

A purchased intangible is valued at its original cost. Original cost for acquiring a patent would include.

purchase price. required filing fees. legal costs to acquire.

to expense an expenditure means to

record the full expenditure as an expense immediately

capitalize

recording an expenditure as an asset

The estimated use the company expects to obtain from an asset before disposing of it is referred to as the

service life

An exclusive right to display a word, slogan, symbol, or emblem that distinctively identifies a company, product, or service is referred to as a

trademark.

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

rue or false: Repairs and maintenance expenditures that do not increase the future benefit of the asset are expensed

true

A new major component that is added to an existing asset is considered a(n

addition which is capitalized

In a basket purchase of assets, the cost must be allocated to the individual assets because

assets have different useful lives

Sarah purchases land to be used for a new storage facility. Which of the following items are capitalized in the cost of land?

costs to remove old buildings legal fees in securing title. coommisions

Which of the following items should be capitalized in the cost of equipment?

Insurance on equipment during shipping Installation and testing of equipment Purchase price Freight to deliver the equipment to its location

Accumulated Depreciation account is a

contra asset