chapter 7
If a company generates its own goodwill through advertising or training, how should these costs be treated?
Expense the costs as incurred.
For accounting purposes, depreciation is
an allocation of a cost of an asset.
building a neon sign for advertisement is what type of expenditure
equipment
replacing heating equipment is what type of expediture
equipment
natural resources
mineral deposits and timber tracts
book value
cost - accumulated depreciation
devaluation of a tangible object
depriciation
a patent gives one the
executive right to produce an idem for 20 years
True or false: Depreciation is a valuation method for property and equipment.
false
s reported by the acquiring company for the amount that the purchase price exceeds the fair value of the acquired company's identifiable net assets.
goodwill
Which of the following are expenditures for assets subsequent to acquisition?
improvements repairs and Maintenace additions
Goodwill may only be recognized
in a business acquisition.
goodwill is often the largest
intangible asset
Assets with no physical form are ________.
intangible assets
Intangible assets that are acquired from other entities are referred to as purchased intangibles, whereas intangibles that are created by a company are referred to as
internally developed intangibles
research and development costs as well as advertising costs are documented on the income statement as
expenses
the cost of major improvements that extend the service life of an asset would be_________________, whereas the cost of maintenance that does not increase the future benefits would be __________________
1. capitalized 2. expensed
a copyright is
An exclusive right of protection given to the creator of a published work such as a song, film, painting, photograph, book, or computer software
Where is the account accumulated depreciation on equipment found on the financial statements?
As a contra account to equipment on the balance sheet
Larry purchases land to be used for a new corporate headquarters. Which of the following items are capitalized in the cost of land?
Costs to remove an old building Grading the land Title insurance Legal fees to secure title
Which statement is true about the straight-line method of depreciation?
It allocates an equal amount of depreciation to each year the asset is used.
Which of the following costs should be capitalized in the costs of acquiring a building?
Remodeling building Realtor commissions Legal fees to obtain title ex
Which of the following items should be capitalized in the cost of equipment?
Sales tax Installation and testing of equipment Freight to deliver the equipment Legal fees to establish title
Which account is credited in a journal entry to record depreciation on machinery
accumulated depreciation
Attorney fees and other costs necessary to secure a patent should be
added to the patent account
Depreciation is a process of cost _________________
allocation
devaluation of an intangible asset
amortization
When assets are purchased in a group for a single sum, it is referred to as a
basket purchase
Recording depreciation results in the allocation of the cost of a long-term asset to the years during which the asset provides
benifits
covering a patio of a restaurant is what type of expenditure.
building
goodwill is recognized only when one company
buys another
The purchase price and all costs to bring an asset to its desired condition and location for use should be
capitalized
journal entry to record depreciation?
debit depreciation expense, credit accumulated depreciation
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 distinction between land and land improvements is that:
land has indefinite life
Long-term tangible assets include
land, equipment, buildings
Goodwill is recorded when
one company acquires another company.
the value of purchased assets is recorded at.
original cost
The exclusive legal right to manufacture a product or to use a process is called a
patent
A purchased intangible is valued at its original cost. Original cost for acquiring a patent would include.
purchase price. required filing fees. legal costs to acquire.
to expense an expenditure means to
record the full expenditure as an expense immediately
capitalize
recording an expenditure as an asset
The estimated use the company expects to obtain from an asset before disposing of it is referred to as the
service life
An exclusive right to display a word, slogan, symbol, or emblem that distinctively identifies a company, product, or service is referred to as a
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
rue or false: Repairs and maintenance expenditures that do not increase the future benefit of the asset are expensed
true
A new major component that is added to an existing asset is considered a(n
addition which is capitalized
In a basket purchase of assets, the cost must be allocated to the individual assets because
assets have different useful lives
Sarah purchases land to be used for a new storage facility. Which of the following items are capitalized in the cost of land?
costs to remove old buildings legal fees in securing title. coommisions
Which of the following items should be capitalized in the cost of equipment?
Insurance on equipment during shipping Installation and testing of equipment Purchase price Freight to deliver the equipment to its location
Accumulated Depreciation account is a
contra asset