ACCT CH 7

The residual value of an intangible asset is usually _______

zero

Intangible assets are categorized as those with finite lives and those with __________ lives.

indefinite

Goodwill and some trademarks are examples of intangible assets that are assumed to a have a(n) _______ life.

infinite

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.

The residual value of an intangible asset is usually

zero

The journal entry to record the amortization for a patent would include a debit to _________ ________ and credit to ________ .

amortization ; expense ; patent

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

recognize a loss of $2,400

The amortization of an intangible asset occurs over the period of time that is the ______ of the legal, regulatory, contractual, or service life.

shorter

Most companies use __________ ___________ amortization for intangible assets.

straight;line

An intangible asset that is measured as the purchase price less the fair value of the net identifiable assets is called

goodwill

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

amount received less the book value of asset sold

No amortization is recorded for

intangible assets with indefinite lives.

The two categories for intangible assets are

intangibles with finite lives. intangibles with indefinite lives.

The method of amortization used for intangible assets

is most commonly straight-line.

Smith Company acquires a franchise from West Corp for $200,000. The franchise agreement covers a period of 10 years. Compute amortization expense for the second year.

$200,000/10 years = $20,000 per year

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

debit to accumulated depreciation credit to equipment debit to loss

Gerhard Inc. recognizes goodwill related to the acquisition of another company. Gerhard should:

-capitalize the goodwill when company is acquired -periodically test goodwill for impairment

1)Depreciation 2)Amortization

1)Property, plant, and equipment 2)Intangible assets

True or false: Goodwill acquired in a business combination is amortized over its estimated service life.

False

Which of the following intangible assets are usually considered to have indefinite lives?

Trademarks Goodwill

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

amortization

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 journal entry to record the amortization of an intangible asset includes

debit to amortization expense. and credit to the intangible asset.

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

intangible

When an asset is no longer useful, but cannot be sold, we have a

retirement

When an asset is no longer useful, but cannot be sold, we have a _______

retirement

On December 30, 20X1, Glaze Corp. disposed of equipment with a historical cost of $50,000 and accumulated depreciation of $30,000. The equipment was sold for $10,000 cash. The journal entry to record the sale will include which of the following entries?

Credit to equipment $50,000 Debit to cash $10,000 Debit to accumulated depreciation $30,000 Debit to loss on sale of asset $10,000

On December 30, 20X1, Glaze Corp. disposed of equipment with a historical cost of $50,000 and accumulated depreciation of $30,000. The equipment was sold for $45,000 cash. The journal entry to record the sale will include which of the following entries?

Credit to gain on sale of asset $25,000 Credit to equipment $50,000 Debit to cash $45,000 Debit to accumulated depreciation $30,000

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

On December 30, 20X1, Rocket Corp. disposed of equipment with a historical cost of $100,000 and accumulated depreciation of $70,000. The equipment was sold for $80,000 cash. The journal entry to record the sale will include which of the following entries?

Debit accumulated depreciation $70,000 Credit gain on sale of equipment $50,000 Credit equipment $100,000 Debit cash $80,000

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?

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

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

Pearce Corporation exchanges old equipment for new equipment. The original cost of the old equipment was $120,000, and its accumulated depreciation at the date of exchange was $40,000. The new equipment received had a fair value of $50,000 and a book value of $32,000. The journal entry to record this exchange will include which of the following entries?

Debit equipment $50,000 Debit loss on exchange $30,000 Credit equipment $120,000 Debit accumulated depreciation $40,000

On December 30, 20X1, Brighton Corp. disposed of equipment with a historical cost of $150,000 and accumulated depreciation of $60,000. The equipment was sold for $70,000 cash. The journal entry to record the sale will include which of the following?

Debit loss on sale of equipment $20,000 Debit cash $70,000 Credit equipment $150,000 Debit accumulated depreciation $60,000

The service life of an intangible asset may be limited by what types of provisions?

Legal Regulatory Contractual

Monet Company purchased a patent with an estimated service life of ten years for $200,000 After three years of amortizing the patent using the straight-line method, Monet estimates that the remaining useful life is only 5 years. Amortization expense for the fourth year is:

[200K = (200K/10)*3] = 140k; 140K/5 = $28K

The cost allocation for property, plant, and equipment is referred to as ____________ while the cost allocation for intangible assets is referred to as _____________

depreciation ; amortization

When a company acquires a business in a business acquisition and the purchase price is greater than the fair value of the net assets acquired, the excess is reported as

goodwill

When a company acquires a business in a business acquisition and the purchase price is greater than the fair value of the net assets acquired, the excess is reported as _____________

goodwill

Intangible assets with indefinite useful lives should

not be amortized.