Fixed Assets

Question 1

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

Answer 1

A Capital Expenditure is DEBITED to a ASSET account

Question 2

Plant Assets and their Expenses

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

Answer 2

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

Question 3

Expense vs Capitalization

Answer 3

Expense

• debited to expense account
• smaller in value

Capitalization

• debited to an asset account
• high value items

Question 4

Result of incorrectly recording Capital Expenditure as Expense

Answer 4

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

Question 5

Deprecation Methods

Answer 5

• Straight-line
• Units-of-production
• Double-Declining

Question 6

Depletion of Natural Resources is a [blank] account

Answer 6

Accumulated Depletion (contra asset)

Question 7

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

Answer 7

Intangible Assets are AMORTIZED using the STRAIGHT-LINE method

Question 8

Goodwill is […]

Answer 8

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

Question 9

Cost of land [is/ is not] depreciated

Answer 9

Cost of land IS NOT depreciated

Question 10

Cost of land includes:
….

Cost of land does not include:
….

Answer 10

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

Question 11

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

Answer 11

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

Question 12

Cost of land improvements [is/is not] depreciated

Answer 12

Cost of land improvements IS depreciated

Question 13

Cost of building [is/is not] depreciated

Answer 13

Cost of building IS depreciated

Question 14

Define: Capitalized vs Expense

Answer 14

capitalized - cost incurred to acquire an asset

eg. A land purchase is capitalized to the land account

expense - cost incurred to maintain assets

Question 15

Straight-line Depreciation

Answer 15

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

Question 16

Units-of-production Depreciation

Answer 16

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

Question 17

Double-Declining Depreciation

Answer 17

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

Question 18

Depreciable Cost is [blank]

Answer 18

Depreciable Cost is the Cost - Residual Value

Question 19

Residual Value is [blank]

Answer 19

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

Question 20

Book Value is [blank]

Answer 20

Book Value is Cost - Accumulated Depreciation