accounting chap 7
An asset that has no physical substance is referred to as a(n)
intangible asset
Which of the following are expenditures for assets subsequent to acquisition?
AdditionsImprrovementsRepairs and maintenance
Larry purchases land to be used for a new corporate headquarters. Which of the following items are capitalized in the cost of land?
Title insurance, Grading the land, Costs to remove an old building, legal fees to secure title.
Green Inc. expenses the cost of small tools provided that the amount is less than $1,000. This accounting treatment is:
accepted if amount is considered immaterial
Which of the following items are initially recorded as an expense on the income statement?
advertising costs research and development costs
Which of the following items are capitalized?
ajor repair that increases future benefits Successful legal defense of a patent Replacing a major component
The gain or loss on disposal of an asset is calculated as:
amount received less the book value of asset sold
long term tangible assets include
land, land improvements, buildings, equipment, and natural resources
he distinction between land and land improvements is that:
lande has a infedite life
he cost of land improvements are capitalized separately from land because land improvements tend to have a _______________ life.
limited
A(n) ---------- is protected by law and gives the creator of a published work the exclusive rights to reproduce and sell the work for the life of the creator plus 70 years.
copyright
A(n) is an exclusive right of protection given to a creator of a published work, such as a song, film, painting, photograph, or book.
copyright
The formula to calculate the depreciation for the units-of-production method (activity-based depreciation) is ((cost - residual value)/total estimated production) x ______.
current year production
Which of the following are long-term tangible assets?
equiptment property
Long-term tangible assets include
euiptment, property, land
If a company generates its own goodwill through advertising or training, how should these costs be treated?
expense cost as incurred
True or false: Goodwill is the intangible value of a company's employees, management team, and business location that is recorded by the company.
false
The exclusive legal right to manufacture a product or to use a process is called a(n
patent
A(n) is the exclusive right to manufacture a product or use a process granted for a period of years.
patent, 20 years
Goodwill is recognized only when one company --------another company.
purchases
True or false: Repairs and maintenance expenditures should be capitalized in the period incurred.
should be expensed false
At the beginning of year 1, Valerie Corp. purchases equipment for $10,000. The equipment has a residual value of $4,000 and an expected service life of 4 years. What is straight-line depreciation for year 1?
($10,000 - 4,000)/4 years = $1,500 per year
At the beginning of year 1, Looby Corp. purchases equipment for $100,000. The equipment has a residual value of $20,000 and an expected service life of 10 years. What is straight-line depreciation for year 1?
($100,000 - 20,000)/10 years = $8,000 per year
e formula to calculate an activity-based depreciation rate is:
(cost - residual value)/estimated total production.
The formula for straight-line depreciation is
(cost - residual value)/service life.
True or false: Internally developed goodwill should be capitalized as an asset.
-False. Costs of internally developed goodwill should be expensed as incurred.
On January 1, 2018, Lennox Corporation purchased equipment for $100,000. Lennox depreciated the equipment straight--line over 10 years with no residual value. What is the book value of the equipment on January 1, 2021?
100,000/10 years = $10,000 depreciation per year. Historical cost of $100,000 less $30,000 depreciation (for 2018, 2019, and 2020) = $70,000
On January 1, 2018, Pritchett Corporation purchased equipment for $50,000. The equipment had a five-year life with a $10,000 residual value. Pritchett uses the straight-line depreciation method. What is the book value of the equipment on January 1, 2021?
50,000-10,000)/5=8,000 8,000 x3 (2018+3=2021) $50,0000 LESS ACCUMULATED DEPRECIATION OF 24,000 = 26,000
Recording depreciation results in the allocation of the cost of a long-term asset to the years during which the asset provides .
benefits
The original cost of the asset less the accumulated depreciation is the ---------of the asset.
book value
The formula for calculating the double-declining-balance method is
book value at beginning of the year less residual value x 2/ estimated service life.
The term means to record the expenditure as an asset.
capitalize
In accounting, expenditures recorded as assets are said to be _____.
capitalized
The purchase price and all costs to bring an asset to its desired condition and location for use should be ______.
capitalized
future benefits
capitalized
Which of these are parts of the journal entry to record depreciation?
debit- depreciation expnese credit- accumulated 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
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 asset must be a current asset used in the normal course of business.
When a company purchases another company and the purchase price is greater than the fair value of the net assets acquired, this excess is referred to as
goodwill
Goodwill may only be recognized
in a business acquisition
Straight-line deprecation is calculated as the depreciable cost divided by
the estimated service life of the asset
A(n) is an exclusive right to display a word, slogan, symbol, or emblem that distinctively identifies a company, product, or service.
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
