Chapter 9 Flashcards Preview

Accounting > Chapter 9 > Flashcards

Flashcards in Chapter 9 Deck (18):
1

Plant assets (4 points)

-physical substances
-used in operations
-not intended for sale
-provide a service for a number of years

2

Land

all necessary costs incurred in making land ready for its intended use (debit land account)

3

Costs of land (4)

cash purchase price
closing costs such as a title and attorneys fee
real estate brokers commissions
accrued property taxes and other liens on the land assumed by the purchaser

4

Land improvements

includes all expenditures necessary to make the improvements ready for their intended use

5

Land improvement example/ expectations (3)

driveways, parking lots, fences, landscaping, underground sprinklers
limited useful lives
expense (depreciate) the cost of land improvements over their useful lives

6

Buildings

includes all costs related directly to purchase or construciton

7

Purchase cost

purchase price, closing costs (attorneys fees, title insurance) real east brokers commission
remodeling and replacing or repairing the roof, floors, electrical wiring, and plumbing

8

construction costs

construction price plus payments for architects fees, building permits, and excavation costs

9

Equipment

include all costs incurred in acquiring the equipment and preparing it for use

10

equipment costs (5)

cash purchase price
sales taxes
freight charges
insurance during transit paid by the purchaser
expenditures required in assembling, installing, and testing the unit

11

factors in depreciation

cost, useful life, salvage value

12

cost

all expenditures necessary to acquire the asset and make it ready for intended use

13

useful life

estimate of the expected life basis on need for repair; service life, and vulnerability obsolescence

14

salvage value

estimate of the assets value at the end of its useful life

15

3 depreciation methods

1. straight-line method
2. declining-balance method
3. units-of-activity method

16

Straight line method

expense is SAME amount each year
cost x rate (same cost and rate each year)

17

Declining balance

accelerated method (double the rate)
depreciation is much greater at the beginning of the period
cost (new book value) x rate

18

units of activity

use units of activity to calculate depreciation cost per unit (depreciation cost/ unit)
expense varies based on activity