Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
58 Cards in this Set
- Front
- Back
What are plant assets? |
Tangible assets used in a company's operations that have a useful life of more than one accounting period |
|
What does cost include? |
All normal and reasonable expenditures necessary to get the asset in place and ready for its intended use |
|
What does the cost of buildings include? |
The cost of purchasing or constructing a building , purchase price, brokerage fees, taxes, title fees, attorney fees, repairs or renovations, materials and labor, and indirect overhead costs |
|
What are land improvements? |
Additions to land and have limited useful life examples are parking lot surfaces , driveways, and Landscaping |
|
What does the cost of land include? |
All expenditures necessary to make that property ready for its intended use |
|
What is depreciation? |
The process of allocating the cost of a plant asset to an expense in the accounting periods benefiting from its use |
|
What is salvage value? |
An estimate of the assets value at the end of its benefit period |
|
What is useful life? |
The length of time a asset is productively used in a company's operations |
|
What does inadequacy refer to? |
The insufficient capacity of a company's plant assets to meet its growing productive demands |
|
What does obsolescence refer to? |
The condition of a plant asset that is no longer useful in producing goods or services with a competitive Advantage because of new inventions and improvements |
|
What are three methods for calculating depreciation? |
Straight line method, units of production method, and declining balance method |
|
What is the straight-line method ratio? |
(Cost - salvage value) ÷ useful life in Periods |
|
What is the entry to record depreciation? |
Debit depreciation expense and credit accumulated depreciation |
|
What is asset Book value? |
The assets total cost- its accumulated depreciation |
|
How do you compute the straight-line depreciation rate? |
100% ÷ useful life |
|
What is the units of production depreciation method? |
A method that charges of varying amount to expense for each period of an assets useful life depending on its usage |
|
What are the two steps in finding the units of production depreciation? |
1. Depreciation per unit = (cost - salvage value) ÷ total units of production 2. depreciation expense = depreciation per unit X units produced in period |
|
What is the accelerated depreciation method? |
A method that yields larger depreciation expense in the early years of an asset to life and less depreciation in later years |
|
What is the most common accelerated method? |
The declining balance method of depreciation |
|
What are the three steps to calculate the declining balance method? |
1. Straight-line rate = 100% ÷ useful life 2. Double-declining-balance rate = 2 × straight-line rate 3. Depreciation expense = double-declining-balance rate × beginning-period book value |
|
What is the modified accelerated cost recovery system? Macrs |
Rules that allow straight-line depreciation for some assets but that requires accelerated depreciation for most kinds of assets for tax purposes |
|
What is the ratio to record the change in estimates for depreciation? |
(Book value - revised salvage value) ÷ revised remaining useful life = new depreciation expense |
|
When is the change in an accounting estimate reflected? |
In all current and future financial statements , not in Prior statements |
|
What is impairment of assets? |
A permanent Decline in the fair value of an asset relative to its Book value |
|
What are Revenue expenditures? |
Also called income statement expenditures they are additional costs of plant assets that do not materially increase the assets life or productive capabilities so they're recorded as expenses |
|
What are capital expenditures? |
Also called balance sheet expenditures they are additional costs of plant assets that provide benefits extending beyond the current period and they are debited to the asset account |
|
What are ordinary repairs? |
Expenditures to keep an asset in normal, good operating condition so they are recorded as an expense |
|
What are betterments / improvements? |
Expenditures that make a plant asset more efficient or productive and are added to the asset cost |
|
What are some examples of betterments / improvements? |
Replacing manual controls with automatic controls, or adding a new Wing or dock to a warehouse. |
|
What are extraordinary repairs? |
Expenditures extending the assets useful life beyond its original estimate and they are added to the assets cost |
|
When is a plant asset discarded? |
When it is no longer useful to the company and it has no market value |
|
When is an asset said to be fully depreciated? |
When accumulated depreciation equals the assets cost |
|
What is the entry to record discarding an asset? |
debit accumulated depreciation of the asset and credit the asset |
|
Entry to record disposal of an asset that still has value |
Debit accumulated depreciation of the asset , debit loss on disposal of equipment , and credit the asset |
|
Entry to record the sale of an asset at Book value |
Debit cash , debit accumulated depreciation of the asset , and credit the asset |
|
Entry to record the sale of an asset above Book value |
Debit cash , debit accumulated depreciation of the asset , credit gain on disposal of equipment , credit equipment |
|
Entry to record the sale of an asset at below Book value |
Debit cash , debit loss on disposal of equipment , debit accumulated depreciation of the asset, and credit the asset |
|
What are natural resources? |
Assets that are physically consumed when used |
|
What is the depletion? |
The process of allocating the cost of a natural resource to the period when it is consumed ( depletion is recorded very similar to depreciation) |
|
2 steps to calculate depletion expense? |
1. Depletion per unit = (cost - salvage value) ÷ total units of capacity 2. Depletion expense = Depletion per unit × units extracted and sold in period |
|
Entry to record depletion expense |
Debit depletion expense and credit accumulated depletion |
|
Entry to record depletion expense with ore inventory left over |
Debit depletion expense, debit ore inventory , and credit accumulated depletion |
|
What are intangible assets? |
Non physical assets used in operations that confer on their owners long-term rights, privileges, or competitive advantages ( they also can have a limited life or indefinite life) |
|
What is amortization? |
Similar to depreciation , when the cost of a limited life intangible asset is expensed over its estimated useful life |
|
Do we amortize an indefinite life intangible asset? |
No but if it is later judge to have a limited life then it will be amoritized |
|
What is impairment? |
A loss in value of an indefinite life intangible asset found through a test for impairment |
|
What is a patent? |
An exclusive right granted to its owner to manufacture and sell a patented an item or use a process for 20 years |
|
The entry to record amortization of an asset |
Debit amortization expense of the asset and credit accumulated amortization |
|
What is a copyright? |
It gives its owner the exclusive right to publish and sell and musical, literary, or artistic work during the life of the Creator plus 70 years |
|
What are franchises and licenses? |
Rights a company or government grants an entity to deliver a product or service under specific conditions |
|
What is the trademark / trade name? |
A symbol, name, phrase or jingle identified with a company, product, or service |
|
What is Goodwill? |
The amount by which a company's value exceeds the value of its individual assets and liabilities |
|
Who grants a lease? |
The lessor |
|
Who secures the right to possess and use the property in the lease? |
The lessee |
|
What is a leasehold? |
The rights the lessor grants to the lessee under the terms of the lease |
|
What are leasehold improvements? |
Alterations or improvements to the leased properties such partitions, painting, and storefronts |
|
What do other intangibles include? |
Software, non-compete Covenants, customer list, and so forth |
|
What is the total asset turnover ratio? |
Net sales ÷ average total assets |