Chapter 7: LearnSmart

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

contractual, legal, regulatory

An exclusive right to display a word, slogan, symbol, or emblem that distinctively identifies a company, product, or serivce is referred to as a _____________________.

trademark

Asset turnover ratio is net sales divided by

average total assets

When assets are purchased in a group for a single sum, it is referred to as a

basket purchase

When sellinf 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 intagible asset would include

debit to amortization credit to the intangible asset

Goodwill

indefinite

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

indefinite

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

indefinite

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

intangible

An asset that has no physical substance is calledn a(n) _______________ asset

intangible

No amortization is recorded for

intangibles assets with indefinite lives

What costs are capitalized as intangible asset for a franchise?

legal costs for the franchise agreement initial payment for the franchise

A purchased intangible is valued at its original cost. Original cost for acquiring a patent would inclued.

legal costs to acquire required filing fees purchase price

The cost of land improvement are capitalized separately from land because land improvements tent to have a __________ life.

limited

Units-of-output method

method that matches usage of the asset with revenues generated from the asset

The profit margin ratio is defined as _____________ ___________ devided by net sales.

net income

Trademark regusters with the U.S. Patent and Trademark Office protects the trademark from use by others for a period of

10 years

Trademark

10 years renewable, possibly indefinite

Which of the following are not accelerated methods of depreciation?

units-of-output depreciation straight-line depreciation

The residual value of an intagible asset is usually _____________.

zero

Match each intangible with its estimated service life.

Patient; 20 years Copyright; Life of creator plus 70 years Trademark; 10 years renewable, possibly indefinite Frenchise; contract term Goodwill; indefinite

Which of the following items should be capitalized in the cost of equipment?

Sale tax, installation and testing of equipment, freight to deliver the equipment, legal feed to establish title

Declining-balace method

accelerated method that multiploes a constant percentage rate times the decreasing book value

A new major component that is added to an existing asset is considered a(n) ____________ and should be capitalized.

addition

straight-line method

allocates an equal portion of the depreciable base to each year of the asset's service life

Deprciation is a process of cost ___________, and not a process of valuation.

allocation

Depreciation is a process of cost _________, and not a process of valuation.

allocation

Depreciation

allocation of the cost of a tanggible fixed asset

Amortization

allocation of the cost of an intagible asset

For acouting purposes, depreciation is

an allocation of a cost of an asset

For accounting purposes, depreciation is

an allocation of a cost of an asset.

The cost of major improvement that extends the service life of an asset would be ___________ , whereas the cost of maintenance that increase the future benefits would be __________.

capitalized, expensed

Frenchise

contract term

Recurring costs

expensed during the period they are incurred

Which of the following costs should be capitalized in the costs of acquiring a building?

realtor commissions, legal fees obtained title, remodeling building

In measuring an impairment loss, the difference between the asset's book value and its fair value is

recognized as a impairment loss

U.S. GAAP

recorded as expense during period incurred

IFRS

recorded as intagible asset

In a basket purchse of assets, the cost must be allocated to the individual assets because

the assets have different useful lives.

The formula for calculating declining balance depreciation is the depreciation rate per year times

the book value at the beginning of the year

In a basket or lump-sum purchase of assers. the total acquisition cost is allocated to the individual assets by multiplying the lump-sum purchase price times

the relative fair value percentage of each asset

A(n) ____________ is an exclusive right to display a word, slogan, symbol, or emblem that distinctively identifies a company, product, or service.

trademark

Which of the following irems typically are classifies as equipment?

computerm and printers used in office, furniture and fixtures, machinery used in manufactoring

When a company purchases another company and the purchse price is greater than the fair value of the net assets acquired, this excess is reffered to as ___________.

goodwill

When an asset has a significant decline in value and is written down, this is called ___________.

impairment

Which of the following costs should be capitalized in the costs of acquiring a building?

Legal fees to obtain title, remoding building, realtor commissions

Which of the following are accelerated methods of depreciation?

MACRS Declining-balance method Double-declining balance method

Profit margin mulitplies by assets turn overs equals return on ___________.

assets

Which of the following statements describe the accouting rules for a franchise agreement?

expense periodic payment as incurred amortize the cost of the franchise over its life capitalize the cost of the franchise

Expenditures for repairs and maintenance should be ________ in the period incurred.

expensed

If an intangible right is not successfully defended, the legal costs should be _____________.

expensed

Recurring cost

expensed during the period they are incurred

The term _________ means to record the expenditure as an asset.

capitalize

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

capitalized

A(n) ___________ is protected by law and gives the creator of a published work the exclusive right to reproduce and sell the work for the life of the creator plus 70 years.

copyright

Clarion purchases land lends and prepares it for use. Which of the following items should be capitalized as land improvements?

cost of sidewalks, cost of driveways, cost of lawn sprinkler systems

Which of these are parts of the journal entry to record depreciation?

credit accumulated depreciation debit depreciation expense

Which of the following costs should be cost should be capitalized in the costs of acquiting a building?

delinquent property taxes, purchase price, legal fees to obtain title

Straight-line, declining-balance, and activity-based refer to accouting methods commonly used to ___________ property, palnt, and equipment.

depreciate

An asset that is traded for another asset is treated as an exchange, whereas an asset that is sold ot retired is treated as a(n) _____________.

disposition

Manchines used in manufacturing, computers, printers, vehicles, furniture, and fixutres generally are classified as

equipment

A contractual arrangmenet in which one entity grants the purchaser the exclusive right to use the trade name, formulas, and product rights within a specific geographic are for a specific period of time is called a

franchise

The key factor is classifying items as repairs and maintenance is that

future benefits are not provided beyond those originally anticipated from the asset

When a company acquires a business in a buiness acquisition and the consideration paid is greater than the fair value of the net assets acquire, the excess is reported as

goodwill

The _____________ principle requires that the cost of an asset should be allocated to the periods in which revenue is produced.

matching

A basket purchase or lump-sum acquisition of assets required that an allocation is made to each individual asset based on the assent's _________.

relative fair value

Which of the following costs should be capitalized in the cost of a acquiring a building?

remodeling building, realtor commissions, legal fees to obtain title

Ther term used to describe the amount the compnay expects to reveive for an asset at the end of its service life is

residual value

Depletion

alloation of the cost of natural resources

Because it is difficult to estimate the future values of research and development, FASB requires that research and development costs be treated as

an expense on the income statement

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

improvements, repairs and maintenance, additions

Cost of acquiring assets

included as part of assets' acquisition costs

The original cost of the asset less the accumulated depreciation is the _______________ _____________ of the asset.

book value

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

depreciation

The formula for straight-line depreciation is

(cost-residual value)/service life

Cost of acquiring assets

Including as part of assets' acquisition costs

Sarah purchases land to be used for a new storage facility. Which of the following items are capitalized in the cost of land?

Commissions, Legal feed to secure title, Costs to remove an old building

Intangible assets with indefinite useful lived should be

tested for impaitment

The formula to calculate the units-or-production depreciation rate is

(cost-resicual value)/estimate total production

The two categories for intagible assets are

1) Intagibles with finite lives 2) Intagibles with indefinite lives

Patent

20 years

What is the formula ro compute the return on assets?

Net income divided by average total assets

Which of the following items should be capitalized in the cost of equipment?

legal feed to establish title, installation and testing of equipment, freight to deliver the equipment, sales tax

Which of the following costs are capitablized as an internally developed patent?

legal fees filing fees

The exclusive legal right to manufactore a product or to use a process is called is called a _____________.

patent

The exclusive legal right to manufacture a product or to use a process is called a ___________.

patent

Which of the following iterms are intagible assets?

patent, trademark, copyright

Noncurrent tangible assets include

plant, equipment, propety

Whcih statement is true about the straight-line method of depreciation?

It allocates an equal amount of depreciation to each year the asset is used

Depreciation

Property Plant Equipment

Amortization

Intangible assets

Expenditures classified as _______________ involve the replacement of a major component of an asset.

improvements

Copyright

Life of creator plus 70

Which of the following items should be capitalized in the cost of equipment?

Insurance of equipment during shipping, purchase price, freight to deliver the equipment to its location, installation and testing of equipment

Which of the following costs should be capitalized in the costs of aquiring a building?

purchase price, legal feeds to obtain title, deliquent property taxes

The depreciable cost of an asset in the asset's cost minus its ___________ value.

residual

Which of the following are not accelerated methods of depreciation?

Straight-line depreciation, units-of-output depreciation

Which of the following items are capitalized into the cost of a patient?

attorney fees to secure patent purchase price filling fees

Accounting for land improvements require that the land improvements are __________ and then ____________ over periods benefited by their use.

capitalized; depreciated

Which items are considered changes in estimates that would be treated on a prospectice basis in the current period and future periods?

change in residual value of an asset change in service life of an asset

The formula to calculate the depreciation for the units-of production method is ((cost-residual value)/total estimated production) X ________).

current-year activity or production

An asset that is traded for another asset is treated as an exchange, whereas an asset that is sold or retired is treated as a(n) _______________.

disposition

If a company generates its own goodwill through advertising or training, how should these costs be treated?

exprese the cost as incurred.

Long-term assets are classified as

intangible, tangible

WHich of the following are classificed as natural resources?

mineral deposits, oil deposits

Ther service life of useful life of an asset is

the amount of use that the company expects to obtain from the asset before disposing of it