Chapter 8

Question 1

Assets that can be physically touched

Answer 1

TANGIBLE ASSETS

Question 2

Any cash disbursement

Answer 2

EXPENDITURE

Question 3

Any cash disbursement results in the acquisition of a non-current asset, including any additional costs involved in preparing the asset for its intended use

Answer 3

CAPITAL EXPENDITURE

Question 4

Allocates the cost of a PPE asset (except land) over the accounting periods expected to receive benefits from its use.

Answer 4

DEPRECIATION

Question 5

The estimated worth of the asset at the end of its estimated useful life.

Answer 5

RESIDUAL VALUE

Question 6

The length of time that a long-lived asset is estimated to be of benefit to the current owner

Answer 6

USEFUL LIFE

Question 7

The amount of goods or services expected to be provided

Answer 7

PRODUCTIVE OUTPUT

Question 8

Assume that the asset will contribute to the earning of revenues in relation to the amount of output during the accounting period. Therefore, the depreciation expense will vary from year to year.

Answer 8

USAGE-BASED DEPRECIATION METHOD

Question 9

Cost - Residual Value / Useful Life = Deprecation Expense; Depreciation Expense x Number of units produced

Answer 9

Units-of-Production Depreciation Equation

Question 10

Cost less accumulated depreciation

Answer 10

CARRYING AMOUNT OR NET BOOK VALUE

Question 11

Time-based depreciation method that assumes that the asset will contribute to the earning of revenues equally each time period. Therefore, equal amounts of depreciation are recorded during each year of the asset’s useful life.

Answer 11

STRAIGHT-LINE METHOD OF DEPRECIATION

Question 12

Depreciation method that assumes that a plant and equipment asset will contribute more to the earning of revenues in the earlier stages of its useful life than in the later stages. This means that more depreciation is recorded in earlier years with the depreciation expense decreasing each year. This approach is most appropriate where assets experience a high degree of obsolescence

Answer 12

ACCELERATED DEPRECIATION

Question 13

One type of accelerated depreciation: Carrying amount x (2/n) where n = useful life

Answer 13

DOUBLE-DECLINING BALANCE METHOD

Question 14

A method that records half a year’s depreciation regardless of when an asset purchase or disposal occurs during the year.

Answer 14

HALF-YEAR RULE

Question 15

Requires each major component that has a different estimated useful life than the rest of an asset to be recorded and depreciated separately

Answer 15

COMPONENTIZATION

Question 16

Long-lived assets that arise from legal rights and does not have physical substance

Answer 16

INTANGIBLE ASSETS

Question 17

An intangible asset that is granted when a company has an exclusive legal privilege to produce and sell a product or use a process for a specified period

Answer 17

PATENT

Question 18

An intangible asset that confers on the holder an exclusive legal privilege to publish a literary or artistic work. In this case, the state grants control over a published or artistic work for the life of the holder (often the original artist) and for a specified period afterward. This control extends to the reproduction, sale, or other use of the material.

Answer 18

COPYRIGHT

Question 19

An intangible asset that is a symbol or a word used by a company to identify itself or one of its products in the marketplace. Symbols are often logos printed on company stationery or displayed at company offices, on vehicles, or in advertising. A well-known example is Coke®.

Answer 19

TRADEMARK

Question 20

An intangible asset that is a legal right granted by one company to another company to sell particular products or to provide certain services in a given region using a specific trademark or trade name.

Answer 20

FRANCHISE

Question 21

The systematic process of allocating the cost of intangible assets over their estimated useful lives using the straight-line, double-declining-balance, units-of-production or other method deemed appropriate.

Answer 21

AMORTIZATION