ch 8: acct for long term assets

Question 1

plant asset

Answer 1

tangible assets that have a useful life for more than 1 acct period

Question 2

4 issues in accounting for plant assits

Answer 2

1-computing the costs
2-allocating the cost
3-acct for subsequenct expenditures
4-recording the disposal

Question 3

machinery and equipment

Answer 3

purchase price
taxes
transportation charge
insurance in transit
(installing, assembling, and testing)

Question 3

cost includes

Answer 3

all expenditures necessary to get an asset in place and ready for use

Question 4

buildings (purchasing one )

Answer 4

-purchase price
-taxes
-title fees
-lawer fees
-repairs/renovations

Question 5

buildings (making own)

Answer 5

-materials, labor, indirect overhead (heat, lighting,dep on machine) building permits, insuarance, etc

Question 6

what is land improvements

Answer 6

additions to land that have limitied useful life

-ex parking lot, driveway, fences

-costs equal costs neceaary to make improvmenents

Question 7

land

Answer 7

-unlimited life

-amt paid, realeste, accureped property taxes.

Question 8

lump sum purchase

Answer 8

when plant assets are purchased as a group in a single transaction

Question 9

depreciation

Answer 9

process of allocating the cost of a plant asset to expense while it is in use

Question 10

factors that determine dep

Answer 10

-cost
-salvage value
-useful life

Question 11

salvage value

Answer 11

estimate of the assets value at the end of its useful life

Question 12

useful life

Answer 12

length of time asset is used in operations

Question 13

straight line depreciation formula

Answer 13

cost-salvage value/useful life

Question 14

straight line dep entry

Answer 14

D- dep expense
C- accumulated dep

Question 15

book value

Answer 15

assets total cost- dep

Question 16

units of production method

Answer 16

Charges a varying amount to depreciation expense for each period of an asset’s useful life depending on its usage

Question 17

units of production formula

Answer 17

step 1(dep per unit): cost-salvage value/total units of production

step2: dep per unit X units produced in period

Question 18

straight line dep charge

Answer 18

charges the same amount to expense for each period of the asset’s useful life

Question 19

declining balance method

Answer 19

1- find straight line rate (100%/useful life)

2- find double declining balance rate (2X straight line rate)

3- find dep expense ( double decline X beg book value)

Question 20

revenue expenditures

Answer 20

costs that do not materially increase the plant assets life

Question 21

capital expenditures

Answer 21

costs if the plant assets that provide benefits for longer than the current period

Question 22

ordinary repairs

Answer 22

expenditires to keep an asset in good operating conditions (exchanging oil)

-part of revenue bc they dont actyally increase anything

Question 23

betterments

Answer 23

Betterments often involve adding a component to an asset that does not always extend its useful
life

x manual to automaic controls

-part of captial

Question 24

extraordinary repairs

Answer 24

expenditures that extend thhe assets useful life beyond its original estiate ex: roofing replacement

Question 25

intsangibe assets

Answer 25

non physcial assets used in operations that give companies lt rights or comp advantage

Question 26

amoritzation

Answer 26

Process of allocating the cost of an intangible asset to expense over its estimated useful life.

Question 27

patent

Answer 27

Exclusive right to manufacture and sell a patented item or to use a process for 20 years.' D-amor exp C-accum amor

Question 28

copyright

Answer 28

Exclusive right to publish and sell a musical, literary, or artistic work during the life of the creator plus 70 years

Question 29

franchise/license

Answer 29

Rights to sell a product or service under specified conditions

Question 30

trademark

Answer 30

A symbol, name, phrase, or jingle identified with a company, product, or service.

Question 31

goodwill

Answer 31

Amount by which a company’s value exceeds the value of its individual assets and liabilities (net assets)

Question 32

Right-of-use asset (lease)

Answer 32

Rights the lessor grants to the lessee under terms of the lease

Question 33

Leasehold improvements

Answer 33

improvements to a leased (rented) property such as partitions, painting, and storefronts.

Question 34

Research and Development

Answer 34

– expenditures aimed at discovering new products, new processes, or knowledge.

Question 35

when to debit machinery

Answer 35

when it is included in the purchasing

Question 36

when to debit expense

Answer 36

when it is not included in purchasing (repair costs)