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Accounting First Day > Chapt 8,9,10 > Flashcards

Chapt 8,9,10 Flashcards

(68 cards)

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0
Q

This is usually the largest type of asset a company has

A

Plant assets

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1
Q

Tangible assets used in a company’s operations that have a useful life of more than one period

A

Plant assets

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2
Q

Assets used in operations

A

Plant assets

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3
Q

Which is a plant asset , a computer used in operations or one that is purchased for resell

A

The one used in operations

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4
Q

These assets have useful lives extending over more than one accounting period

A

Plant assets

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5
Q

Is inventory a plant asset

A

No

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6
Q

Equipment used in an event of a break down or peak period is what type of asset

A

Plant asset

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7
Q

Plant assets are recorded at cost when acquired

A

This is consistent with the cost principle

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8
Q

This includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use

A

Cost

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9
Q

To be recorded at cost an expenditure must be

A

Normal
reasonable
necessary

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10
Q

This asset has an indefinite(unlimited) life

A

Land

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11
Q

Land improvements have a …. Life

A

Limited useful

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12
Q

Operating expense

A

Cost for after asset is placed in use

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13
Q

Plant assets purchased in a group

A

Lump-sum purchase

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14
Q

Process of allocating the cost of a plant asset to expense in the accounting periods benefitting from its use

A

Depreciation

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15
Q

Depreciation does not

A

Measure the decline in the assets market value

Assets physical deterioration

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16
Q

Factors in determining depreciation

A

Cost
Salvage value
Useful life

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17
Q

Estimate of the assets value at the end of its benefit period

A

Salvage value

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18
Q

Length of time asset is productively used in a company’s operations

A

Useful life

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19
Q

Useful life is not the same as productive life

A

Remember computer company example

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20
Q

What variables make useful life difficult to predict?

A

Wear and tear from use in operations

Inadequacy and obsolence

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22
Q

The insufficient capacity of a company’s plant assets to meet its growing productive demands

A

Inadequacy

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23
Q

What plant asset is not depreciated

A

Land

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24
Q

Charges the same amount of expense to each period of the assets useful life

A

Straight line method

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25
Cost-accumulated depreciation=
Book value
26
Charges a varying amount to expense for each period of an assets useful life depending on its usage
Units of production depreciation
27
Yields larger depreciation expenses in the early years of an assets life and less depreciation in later years
Accelerated depreciation method
28
A rule for depreciating assets, allows straight line depreciation for some assets but requires accelerated depreciation for most kinds of assets
Modified accelerated cost recovery system (macrs) Not acceptable for financial reporting
29
Revising an estimate of the useful life or salvage value of a plant asset is referred to as.ll.and is reflected in current and future financial statements, not prior statements
Change in accounting estimate
30
Plant assets reported on a balance sheet at their undepreciated cost (book value)not fair (market )value
...
31
Two types of liquid assets
Cash and investments
32
Additional cost of plant assets that do not materially increase the assets life or productive capabilities Recorded as expenses and deducted from current periods revenues
Revenue expenditures or income statement expenditures
33
Cleaning, reprinting, adjustments, lubricants
Examples of revenue expenditures
34
Additional cost of plant assets that provide benefits extending beyond the current period Debited to asset accounts and reported on balance sheets
Capital expenditures also called balance sheet expenditures
35
Expenditures to keep an asset in normal good operating condition
Ordinary repairs
36
Expenditures that make a plant asset more efficient or productive....does not always increase an assets useful life
Betterment or improvement
37
Expenditures extending the assets useful life beyond its original estimate -capital expenditure
Extraordinary repairs
38
Ways of disposal of plant assets
Discarding Sale Exchange
39
Assets that are physically consumed when used
Natural assets
40
Process of allocating the cost of a natural resource to the period when it is consumed
Depletion
41
No physical assets used in operations that confer on their owners long term rights, privileges, or competitive advantages
Intangible assets
42
Types of intangible assets
``` Patents Copyrights Licenses Leaseholds Franchises Goodwill and trademarks ```
43
Is goodwill amortized
No,mist tested for impairment
44
The amount by which a company's value exceeds the value of its individual assets and liabilities
Good will
45
Crucial factors of a liability
A past transaction or event A present obligation A future payment of assets or services
46
Obligations due within one year or the company's operating cycle
Current liabilities
47
Examples of current liabilities
``` Wages payable Short term notes payable Warranty liabilities Lease liabilities Taxes payable Unearned revenues ```
48
A company's obligations not expected to be paid within the longer of one year or the company's operating cycle
Long term liabilities
49
Examples of long term liabilities
Bonds payable Lease liabilities Warranty liabilities Long term notes payable
50
3 questions concerning liabilities
Whom to pay When to pay How much to pay
51
Written promise to pay a specified amount on a definite future date within one year or the company's operating cycle, whichever is longer
Short term notes payable
52
Total compensation an employee earns including wages, salaries,commissions,bonuses, and any compensation earned before deductions such as taxes
Gross pay
53
Gross pay less all deductions
Net pay
54
Amounts withheld from an employees gross pay either required or voluntary
Payroll deductions
55
Payroll deductions are current liabilities until amount is transmitted to perspective places
......
56
Reflects a company's stability or instability in employing workers
Merit rating
57
A potential obligation that depends on a future event arising from a past transaction or event I.e. Pending lawsuit
Contingent liability
58
Contingent liabilities are either
Probable ...record liability Possible ...disclose in note Remote ...no disclosure
59
Are natural disasters and the development of new competing products or services contingencies
No
60
Advantages of bonds
Bonds do not affect owner control Interest on bonds is tax deductible Bonds can increase return on equity
61
Disadvantages of bonds
Bonds can decrease return on equity | Bonds require payment of both periodic interest and the par value at maturity
62
A bond is usually issued in what amount
1,000 or 5,000
63
Legal document identifying the rights and obligations of both the bondholders and the issuer
Bond indenture
64
Rate that borrowers are willing to pay and lenders are willing to accept for a particular bond and it's risk level
Market rate
65
Interest rate specified in the bond indenture
Contract rate
66
An obligation requiring a series of payments to the lender
Installment note
67
Legal agreement that helps protect a lender if a borrower fails to make required payments on notes or bonds
Mortgage
68
Condition of a plant asset that is no longer useful in producing goods or services with a competitive advantage because of new inventions and improvements
Obsolescence

Accounting First Day (4 decks)

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