Chapter 7

d

Operating assets with no physical properties are called a. property, plant, and equipment. b. current assets. c. plant assets. d. intangible assets.

false

T/F: Acquisition cost includes all of the costs that are normal and necessary to acquire and maintain a plant asset over its useful life.

false

T/F: All intangible assets are subject to amortization.

false

T/F: An expenditure that does not increase the future economic benefits of the asset is referred to as a capital expenditure.

false

T/F: Costs incurred related to plant assets that are already in use are called revenue expenditures if the cost increases the useful life or the asset's productivity.

false

T/F: Research and Development costs should be added to the cost of patents.

their legal lives or useful lives, whichever is shorter

The accounting life of intangible assets is determined by:

net book value

amount that our PPE is improving the asset group

NBV= Residual/Salvage value

in the straight-line method, what two things should be equal, at the end of the assets life?

depreciable cost

total amount of asset that can be used up over its lifetime is known as

because we are using up more and more of the asset

in the straight-line method, why is NBV decreasing?

c

ABC company purchased a truck at a cost of $12,000. The truck has an estimated residual value of $2,000 and an estimated life of 5 years, or 100,000 hours of operation. The truck was purchased on January 1, 2019, and was used 27,000 hours in 2019 and 26,000 hours in 2020. Which of the following accounts would not be reported in the Property, Plant, and Equipment section of a balance sheet? a. accumulated depreciation-buildings b. land c. depreciation expense--buildings d. buildings

b

A company purchased a patent for $100,000 at the beginning of the current year which it believes has an expected useful life of 5 years. Fortunately, the patent has a legal life of 20 years. How much amortization expense should be recorded in the current year? a. $5,000 b. $20,000 c. $0 d. $100,000

matching principle

As we use our operating assets up, The amount of asset used up is allocated to expense during the period of economic benefit (during the period of time that we're using that asset). This is an embodiment of the

b

On the balance sheet, the cumulative amount of plant and equipment already expensed is reported in an account called a. depreciation expense. b. accumulated depreciation. c. accumulated amortization. d. amortization expense.

c

Which of the following costs related to the purchase of production equipment would be considered a revenue expenditure? a. Installation costs for equipment b. Purchase price of the equipment less the cash discount c. Repair and maintenance costs during the equipment's first year of service d. Transportation charges for getting the equipment delivered to the business

operating assets

___________ are resources categorized as long-lived assets that are used by the company in the normal course of operations.

operating assets

______________ are Costs NOT EXPENSES! (this is why we "Capitalize" them)