Chapter 10 Accounting terms
Masonry Construction Group paid $13,000 for a plant asset that had a market value of $13,500. At which of the following amounts should the plant asset be recorded?
$13000
Businesses record goodwill ________.
if they acquire another company at an amount higher than the market value of its net assets
Freeman Company owns a delivery truck. Which of the following costs, associated with the truck, will be capitalized and depreciated?
modification for new use
Westin Delivery Service owns a delivery truck. Which of the following costs, associated with the truck, will be treated as a revenue expenditure?
oil change and lubrication
The expected value of an asset at the end of its useful life is known as ________
residual value
Which of the following depreciation methods always allocates a higher amount of depreciation in earlier years than in later years?
the double−declining−balance method
Which of the following depreciation methods allocates a varying amount of depreciation to expense each year based on an asset's usage?
the units−of−production method
Which of the following items should be amortized?
patents, copyrights, trademarks
Which of the following is a characteristic of a plant asset, such as a building?
It is used in the operations of a business.
Which of the following is the correct accounting treatment for a patent?
A patent must be capitalized and amortized over 20 years or less.
Which of the following is an expense that results from the usage of a natural resource?
Depletion
Which of the following should be included in the cost of land?
cost to clear the land of old buildings
Which of the following is true of goodwill?
Goodwill is not amortized.
Regarding impairment of intangible assets, which of the following statements is incorrect?
If any impairment occurs, the company records a loss in the period in which the intangible asset was acquired.
Which of the following requires businesses to record depreciation?
Matching principle
A company's accountant capitalized a payment that should have been recorded as a revenue expenditure. How will this error affect the company's financial statements?
Net income will be overstated
Which of the following is true when the estimate of an asset's useful life is changed?
The asset's remaining depreciable book value will be spread over the asset's new useful life.
A fully depreciated plant asset ________.
can be discarded, sold, or exchanged for another plant asset
The type of intangible asset related to the exclusive right to reproduce and sell a book or intellectual property is a ______
copyright
