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
