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Question 1

Gross profit

Answer 1

Gross profit equals sales revenue minus cost of goods sold

Question 2

Raw materials inventory

Answer 2

The cost of parts and materials purchased from suppliers for use in the production process.

Question 3

Work in process inventory

Answer 3

The cost of inventory a partially completed goods work in process includes the materials used in the production of the product as well as labor costs and overhead cost.

Question 4

Finished goods inventory

Answer 4

The cost of the stock of completed product ready for delivery to customers.

Question 5

Impairment

Answer 5

No expenses recorded until management can reasonably estimated useful life of the asset. Although intangible assets with a definite lives are not subject to amortization, they must be tested annually to determine if their value has been impaired. The impairment test for intangibles is slightly different from the apartment test use to evaluate PPE assets. The intangible asset is impaired if the book value of the asset exceeds its fair value and the right down as equal to the difference between the book value in the fair value. It is considered impaired when the sum of the undiscounted expected cash flows to be derive from the asset is less than its current book value.

Question 6

Definite life

Answer 6

When intangible assets are required and capitalize a determination must be made as to whether the ass it has a definite life. Examples of intangible assets with definite lives include patents and franchise rights. And intangible asset with a definite life must be amortized over the expected useful life of the asset.

Question 7

Amortization

Answer 7

Amortization is the systematic allocation of the cost of an intangible asset to the periods benefited similar to depreciation of tangible assets.