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.