Chapter 8

Question 0

Tangible longterm assets are classified as:

Answer 0

1) Property plant and equipment (Plant assets are fixed assets)
2) Natural resources
3) Land

Question 1

Long term assets

Answer 1

Can be tangible or intangible

Tangible assets have a physical present
Intangible assets are represented by physical documents and are rights and privileges

Question 2

Depreciation

Answer 2

Term used to recognize expense for property plant and equipment

Question 3

Depletion

Answer 3

Term used to recognize expense for natural resources

Question 4

Intangible Assets with identifiable useful lives:

Answer 4

Includes patents and copyrights.

Term used for recognizing expense is called amortization

Question 5

Intangible assets with indefinite useful lives:

Answer 5

Include renewable franchises trademarks and goodwill

Question 6

Historical Cost Concept

Answer 6

Requires that an asset be recorded at the amount paid for it.

This amount includes purchase price + any cost necessary to get the asset ready for its intended use.
Cost does not include payment for fines and damages.

Question 7

Basket purchase

Answer 7

Acquiring a group of assets is a single transaction

Question 8

Relative fair market value method:

Answer 8

Method used to allocate the basket purchase into a group of assets

Appraisal value
Asset 1 Asset 11
Asset 2 /Total = % of Appraisal(Basket)=
Total Allocate for Asset 1

Question 9

Salvage value

Answer 9

The expected market value of a fully depreciated asset

Question 10

3 methods to recognize depreciation expense

Answer 10

1) Straight Line - same amount of depreciation expense each period
2) Double - Declining - accelerated method, more depreciation expense in early years
3) Units of production - varying amounts of depreciation expenze

Question 11

Depreciation expense

Answer 11

(asset cost - salvage value) / useful life = appreciation expense per year

Question 12

Deprecation reduces assets:

Answer 12

Reported using a contra asset account called accumulated depreciation (has credit balance)

Question 13

Book value (also called carrying value)

Answer 13

Associated asset account - accumulated depreciation

Question 14

Depreciation expense journal entry:

Answer 14

Depreciation expense

Accumulated depreciation

Question 15

Retiring asset

Answer 15

Can have a gain or loss

Gain - Sold asset for more than book value
Loss - Sold asset for less than book value

Question 16

Gain on sale of tangible asset

Journal entry

Answer 16

Cash
Accumulated Depreciation
Asset
Gain on Sale of Asset

Question 17

Loss on sale of tangible asset

Journal entry

Answer 17

Cash
Accumulated Depreciation
Asset
Loss on Sale of Asset

Question 18

Double decking balance depreciation

Answer 18

1) Determine the straight-line rate, 1 / number of years of useful life
2) Determine the double-declining-balance rate,
* percentage of #1 by 2
3) Determine the depreciation expense,

Question 19

Double declining balance depreciation

Answer 19

an asset cannot be depreciated below its salvage value