It is the preferred method for companies expecting to use the asset more in its early years of life.b. It recognizes expense proportionately with the amount of use of the asset.c. It allocates an equal amount of law firm chart of accounts depreciation to each year the asset is used.d. Automobiles are a useful way of looking at the difference between repair and maintenance expenses and capitalized modifications. Routine repairs such as brake pad replacements are recorded as repair and maintenance expense. However, a car may be modified to change its appearance or performance.
NC Life Insurance – Other Life Topics – Chapter Quiz
An asset that has no physical substance is referred to as a(n) ________. Current asset.intangible asset.finite asset.depreciable asset. The formula to calculate the depreciation for the units-of-production method (activity-based depreciation) is ((cost – residual value)/total estimated production) x ______. A franchise is a contract between two parties granting the franchisee (the purchaser of the franchise) certain rights and cost allocation of an intangible asset is referred to as privileges ranging from name identification to complete monopoly of service.
- The allocation of the cost of a tangible fixed asset is referred to as _________ , whereas the allocation of the cost of an intangible asset is referred to as _________.
- Historical cost.residual value.lower of cost or market value.impairment value.
- Likewise, if replacing the engine of an older car extends its useful life, that cost would also be capitalized.
- Performing tasks such as oiling and calibrating to an existing machine.b.
Legal
Recording depreciation results in the allocation of the cost of a long-term asset to the years during which the asset provides _________ . A loss must be recognized for the remaining book value.no cash is received. The estimated use that the company expects to obtain from the asset before disposing of it.
Property, Plant, and Equipment (Fixed Assets)
- Many businesses invest a lot of money in production facilities and operations.
- For example, if a supercharger is added to a car to increase its horsepower, the car’s performance is increased, and the cost should be included as a part of the vehicle asset.
- When an asset is no longer useful, but cannot be sold, it is called an asset __________.
- Why are the costs of putting a long-term asset into service capitalized and written off as expenses (depreciated) over the economic life of the asset?
- Therefore, this maintenance would be expensed within the current period.
- The parties involved in a franchise arrangement are not always private businesses.
These restrictions generally are related to rates or prices charged; also they may be in regard to product quality or to the particular supplier from whom supplies and inventory items must be purchased. Test for impairment using the future cash flows.Measurement of the impairment and record the loss. The cost of land improvements are capitalized separately from land because land improvements tend to have a __________ useful life. The allocation of the cost of a tangible asset over its service life is referred to as __________. When selling a fixed asset, the seller recognizes a gain or loss for the difference between the amount received and the ______ value of the asset sold. Asset turnover ratio is net sales divided by ___________.average total assets.average accounts receivable.average noncurrent assets.average current assets.
2 Analyze and Classify Capitalized Costs versus Expenses
The amount of any goodwill impairment loss is to be recognized in the income statement as a separate line before the subtotal income from continuing operations (or similar caption). Why are the costs of putting a long-term asset into service capitalized and written off as expenses (depreciated) over the economic life of the asset? Liam plans to buy a silk-screening machine to help create clothing that he will sell. The machine is a long-term asset, because it will be used in the business’s daily operation for many years. Overall, in determining a company’s financial performance, we would not expect that Liam should have an expense of $5,000 this year and $0 in expenses for this machine for future years in which it is being used. GAAP addressed this through the expense recognition (matching) principle, which states that expenses should be recorded in the same period with the revenues that the expense helped create.
The estimated use the company expects to obtain from an asset before disposing of it is referred to as the _______ life of the asset. If a company replaces a major component of an asset with a new component with the same characteristics of an old component, it is classified as ___________. An addition.repairs and maintenance.a rearrangement.an improvement. The original cost of the asset less the accumulated depreciation is the ________ ________ of the asset. The purchase price and all costs to bring an asset to its desired condition and location for use should be ______. The parties involved in a franchise arrangement are not always private businesses.
PREP U CHAPTER 16 END OF LIFE
Explain and Apply Depreciation Methods to Allocate Capitalized Costs addresses the available methods that companies may choose for expensing capitalized assets. A goodwill account appears balance sheet in the accounting records only if goodwill has been purchased. A company cannot purchase goodwill by itself; it must buy an entire business or a part of a business to obtain the accompanying intangible asset, goodwill. Specific reasons for a company’s goodwill include a good reputation, customer loyalty, superior product design, unrecorded intangible assets (because they were developed internally), and superior human resources. Since these positive factors are not individually quantifiable, when grouped together they constitute goodwill.
Product
The cost of the asset.the estimated service life of the asset.the residual value of the asset. A(n) __________ is a contractual arrangement in which one entity grants the purchaser the exclusive right to use the trade name, formulas, and product rights within a specific geographic area for a specific period of time. The depreciation method that allocates an equal amount of the depreciable base to each year of the asset’s service life is the______. Straight-line method.MACRSunits-of-output method.double-declining-balance method.
Multiple select question.Timing test on when the cash flows are received.Test for impairment using the future cash flows.Measurement of the impairment and record the loss.Percentage of assets test for total impaired assets. The key factor in classifying items as repairs and maintenance is that__________. The asset must be a current asset used in the normal course of business.b. The invoice must be less than $1,000 for productive assets.c. Future benefits are not provided beyond those originally anticipated from the asset. The formula for calculating the double-declining-balance method is________.