MGMT 212 HW 7 Questions

An asset _________________ occurs when an asset is no longer useful, but cannot be sold.

retirement

Depreciation

Allocation of the cost of a tangible fixed asset

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

Additions Improvements Repairs and maintenance

Which of the following are long-term tangible assets?

Property Equipment

The journal entry to retire old equipment that is not fully depreciated includes a:

Debit to accumulated depreciation Debit to loss Credit to equipment

What is the formula for the profit margin ratio?

Net income divided by net sales.

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.

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

Otto Inc. retires old equipment with a book value of $2,400. Otto should

recognize a loss of $2,400

The types of expenditures that can occur subsequent to an asset's acquisition are

repairs and maintenance. additions. improvements.

Cheng Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $90,000, and its accumulated depreciation at the date of exchange was $40,000. The new equipment received had a fair value of $40,000 and a book value of $35,000. The journal entry to record this exchange will include which of the following entries?

- Credit equipment $90,000 - Debit accumulated depreciation $40,000 - Debit loss on exchange $10,000 - Debit equipment $40,000

Amortization

Allocation of the cost of an intangible asset

Depletion

Allocation of the cost of natural resources

The journal entry to retire old equipment that is not fully depreciated includes a:

Credit to equipment Debit to loss Debit to accumulated depreciation

Wall Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $100,000, and its accumulated depreciation at the date of exchange was $60,000. The new asset received had a fair value of $80,000 and a book value of $65,000. The journal entry to record this exchange will include which of the following entries?

Debit accumulated depreciation $60,000 Debit equipment $80,000 Credit equipment $100,000 Credit gain on exchange of asset $40,000

Krasel Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $90,000, and its accumulated depreciation at the date of exchange was $70,000. The new asset received had a fair value of $50,000 and a book value of $45,000. The journal entry to record this exchange will include which of the following entries? - Credit equipment $70,000 - Debit accumulated depreciation $70,000 - Debit equipment $45,000 - Credit gain on exchange of asset $30,000 - Debit equipment $50,000 - Credit equipment $90,000 - Credit accumulated depreciation $70,000

Debit accumulated depreciation $70,000 Credit gain on exchange of asset $30,000 Debit equipment $50,000 Credit equipment $90,000

Allocating the cost of intangible assets to expense is referred to as _____________________.

amortization

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

amount received less the book value of asset sold

For accounting purposes, depreciation is:

an allocation of a cost of an asset.

In accounting, the term impairment refers to

an asset's significant decline in value.

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

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

capitalized

The allocation of the cost of a tangible asset over its service life is referred to as _____________________.

depreciation

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

When an asset has a significant decline in value and is written down, this is called ______________.

impairment

Amortization refers to the allocation of the cost of _________________ assets to expense.

intangible

An asset that has no physical substance is called a(n) ____________ asset.

intangible

An asset that has no physical substance is referred to as a(n)

intangible asset.

Long-term tangible assets include:

land. buildings. equipment.

The profit margin ratio is defined as ___________ ___________ divided by net sales.

net income