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Flashcards in Fixed Assets Deck (20)
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1

A Capital Expenditure is [debited/credited] to a [asset/liability/capital] account

A Capital Expenditure is DEBITED to a ASSET account

2

Plant Assets and their Expenses

Plant Assets => [ ]
Natural Resources => [ ]
Intangible Assets => [ ]

Plant Assets => [Depreciation]
Natural Resources => [Depletion]
Intangible Assets => [Amortization]

3

Expense vs Capitalization

Expense
- debited to expense account
- smaller in value

Capitalization
- debited to an asset account
- high value items

4

Result of incorrectly recording Capital Expenditure as Expense

• Overstates Expenses
• Understates Net Income
• Understates Capital
• Understates Assets (equipment)

5

Deprecation Methods

• Straight-line

• Units-of-production

• Double-Declining

6

Depletion of Natural Resources is a [blank] account

Accumulated Depletion (contra asset)

7

Intangible Assets are [Depreciated/Depleted/Amortized] using the [blank] method

Intangible Assets are AMORTIZED using the STRAIGHT-LINE method

8

Goodwill is [...]

paying a premium for a company, cost of purchase is higher than market value of the net assets

9

Cost of land [is/ is not] depreciated

Cost of land IS NOT depreciated

10

Cost of land includes:
....

Cost of land does not include:
....

Cost of land includes:
• Purchase price
• Brokerage Commission
• Survey and Legal Fees
• Property taxes (if applicable)
• Taxes on transfer of ownership
• Cost of clearing land / removing buildings

Cost of land does not include (land improvements):
• Fencing
• Paving
• Sprinkler systems
• Lighting
• Signage

11

Fencing, paving, lighting, and landscaping are examples of [ blank ]

Fencing, paving, lighting, and landscaping are examples of LAND IMPROVEMENTS

12

Cost of land improvements [is/is not] depreciated

Cost of land improvements IS depreciated

13

Cost of building [is/is not] depreciated

Cost of building IS depreciated

14

Define: Capitalized vs Expense

capitalized - cost incurred to acquire an asset

eg. A land purchase is capitalized to the land account

expense - cost incurred to maintain assets

15

Straight-line Depreciation

(cost - residual value) x 1/life x months/12

16

Units-of-production Depreciation

(cost - residual value) ÷ life in units
or
(cost - residual value) ÷ (lifetime units / yearly units)

17

Double-Declining Depreciation

(cost - accumulated depreciation) x 2/life x months/12

18

Depreciable Cost is [blank]

Depreciable Cost is the Cost - Residual Value

19

Residual Value is [blank]

Residual Value is the value remaining at the end of the asset's life, after depreciation

20

Book Value is [blank]

Book Value is Cost - Accumulated Depreciation