CH7 Learnsmart

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 original cost of an asset minus accumulated depreciation is

book value

The original cost of the asset less the accumulated depreciation is the _______ ________ of the asset.

book value

Long-term tangible assets include

equipment, land, buildings

Depletion

Allocation of the cost of a natural resource over its service life

Depreciation

Allocation of the cost of a tangible fixed asset

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

amount receives less the book value of asset sold

Amortization

Allocation of the cost of an intangible asset over its service life

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

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

Which of the following are long-term tangible assets?

Equipment, property

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

Repairs and maintenance, additions, improvements

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, all costs should be capitalized to bring the asset to its intended and useful state.

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

additions, repairs and maintenance, improvements

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

capitalized

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

debit to loss, debit to accumulated depreciation, credit to equipment

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

depreciation

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

intangible asset

What is the formula for the profit margin ratio?

net income/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