Chapter 10-Plant Assets, Natural Resources, & Intangibles

Question 1

Capitalize

Answer 1

Recording the acquisition of land, building, or other assets by debiting (increasing) an asset account.

Question 2

Relative-Market-Value Method

Answer 2

A method of allocating the total cost of multiple assets purchased at one time. Total cost is divided among the assets according to their relative market values

Question 3

Capital expenditure

Answer 3

Debited to an asset account because it increases the asset’s capacity or efficiency or extends the useful life.

Question 4

Revenue Expenditure

Answer 4

An expenditure that does not increase the capacity or efficiency of an asset or extend its useful life. Revenue expenditures are debited to an expense account

Question 5

Obsolete

Answer 5

An asset is considered obsolete when a newer asset can perform the job more efficiently than the old

Question 6

Residual value

Answer 6

The expected value of a depreciable asset at the end of its useful life.

Question 7

Depreciable cost

Answer 7

Depreciable cost = Cost - Residual Value

Question 8

Straight-Line Depreciation

Answer 8

SLD = (cost-residual value)/useful life

Question 9

Depreciation per Unit

Answer 9

Depreciation per unit: (cost-residual value)/useful life in units

Question 10

Units of Production

Answer 10

UoP: depreciation per unit x current year usage

Question 11

Double-Declining Balance

Answer 11

DDB: Book value/useful life x 2

Question 12

Book Value

Answer 12

Book Value: cost - accumulated depreciation

Question 13

Revised depreciation

Answer 13

Revised depreciation: (book value - revised residual value)/revised useful life remaining

Question 14

Natural Resource

Answer 14

An asset that comes from the earth and is consumed

Question 15

Depletion

Answer 15

The process by which business spread the allocation of a natural resource’s cost over its usage

Question 16

Intangible Asset

Answer 16

An asset with no physical form that is valuable because of the special rights it carries

Question 17

Amortization

Answer 17

The prices by which businesses spread the allocation of an intangible asset’s cost over its useful life

Question 18

Impairment

Answer 18

A permanent decline in asset value

Question 19

Patent

Answer 19

An intangible asset that is a federal government grant conveying an exclusive 20-year right to produce and sell a process, product, or formula

Question 20

Copyright

Answer 20

Exclusive right to reproduce and sell a book, musical composition, film, other work of art, or intellectual property

Question 21

Trademark

Answer 21

An asset that represents distinctive identifications of a product or service

Question 22

Franchise

Answer 22

Privilege granted by a business to sell a product or service under specified conditions

Question 23

License

Answer 23

Privilege granted by a government to use public property in performing services

Question 24

Goodwill

Answer 24

Excess of the cost of an acquired company over the sum of the market values of its net assets (assets - minus)

Question 25

Asset turnover ratio

Answer 25

Measures how efficiently a business uses its average total assets to generate sales. Net sales/average total assets.

Question 26

Commercial Substance

Answer 26

A characteristic of a transaction that causes a change in future cash flows