ch 9 terms

Question 1

cost of asset definition

Answer 1

sum of all costs incurred to bring asset to intended purpose, minus discounts

Question 2

land purchase definition

Answer 2

purchase price, brokerage commission, fees, property tax
NOT AMORTIZED

Question 3

define land improvement

Answer 3

signs sprinklers landscaping paving

Question 4

building purchase define

Answer 4

purchase price, taxes, renos

Question 5

building construction things

Answer 5

all construction fees

Question 6

machinery purchase

Answer 6

purchase price, transportation, insurance, tax, installation

Question 7

leasehold improvement s

Answer 7

assets owned by business. amortized over term of lease or life of improvement (whichever shorter)
painting, installation

Question 8

what get capitalized?

Answer 8

payments that bring value past period of payment
asset on balance sheet

Question 9

what gets expensed?

Answer 9

expenses that only bring value in current period
expense on income statement

Question 10

depreciation JE

Answer 10

depreciation exp
accumulated depreciation

Question 11

depreciation methods

Answer 11

straight line, units of production, diminishing balance

Question 12

straight line depreciation

Answer 12

cost - residual value / useful life in years = annual depreciation

Question 13

unit of production depreciation

Answer 13

for factory, vehicles
changes every year
cost-residual value / units produced in life = expense per unit x # units in that year = depreciation for that year.

Question 14

diminishing balance depreciation

Answer 14

expense shrinks each year
depreciation rate: 100%/useful life of asset in years
book value: cost - acc amortization
dep rate z book value = amortization for every year

Question 15

depreciation revision

Answer 15

not retrospective, only current and future period

Question 16

asset impairment

Answer 16

if asset fair value is lower than than carrying value of asset, adjust to fair value
obsolescence, physical damage, loss of market value

Question 17

asset impairment JE

Answer 17

impairment loss
acc dep

Question 18

what are natural resources

Answer 18

oil, wood, stone, NOT agriculture
“wasting assets” that deplete slowly
UOP method normally used

Question 19

derecogntion of assets

Answer 19

when disposed of or dold

Question 20

what is carrying amount

Answer 20

cost - acc dep

Question 21

what is gain or loss on disposal

Answer 21

proceeds - carrying amount.

Question 22

if proceeds >
gain or loss?

Answer 22

gain
credit

Question 23

if proceeds <
gain or loss?

Answer 23

loss
debit

Question 24

define patent

Answer 24

exclusive right to produce for 20 yrs
finite

Question 25

define copyright

Answer 25

protection for life of creator + 50 finite

Question 26

research costs capitalized or expensed

Answer 26

expenses and finite

Question 27

development costs capitalized or expensed?

Answer 27

capitalized if associated with IDable product finite

Question 28

trademark/tradename

Answer 28

word, phrase, jingle, symbol distinguishing brand infinite

Question 29

franchise

Answer 29

contractual agreement to sell indefinite

Question 30

license

Answer 30

grant to hold operating rights indefinite

Question 31

goodwill

Answer 31

asset repping future benefits from purchase of business NOT AMORTIZED

Question 32

define lessor

Answer 32

owner of asset for lease (landlord)

Question 33

define lessee

Answer 33

leasing asset from owner (tenant)

Question 34

define return on assets

Answer 34

how much profit generated per $1 invested high better

Question 35

define asset turnover

Answer 35

efficiency of asset use higher better

Question 36

lease under ASPE

Answer 36

income tax advantage slow cash payment

Question 37

capital lease

Answer 37

ASPE risks and perks all on lessee who must record asset and liability at minimum lease payment valje

Question 38

operating lease

Answer 38

ASPE risks and perks all on lessor

Question 39

lease under IFRS

Answer 39

risks and perks on lessee viewed as purchase with loan payments considered period expense of under 12 month, low value asset