Module 10: Long-Lived Assets

What is included in the capitalized cost of a long-lived asset?

Cost of purchasing the asset and necessary costs to make it ready for use.

What is "materiality" in accounting?

Recording significant costs that affect decisions.

 How is "book value" calculated for a long-lived asset?

Historical cost minus accumulated depreciation.

Which asset is NOT depreciated?

Land

How do you calculate the depreciable amount?

Cost minus residual value.

What is the purpose of accumulated depreciation?

To track the total depreciation of an asset over time

What changes when calculating depreciation for a partial year?

Multiply monthly depreciation by the number of months in use.

 What must be determined when disposing of a long-lived asset?

The gain or loss based on selling price minus book value.

What is the residual value of intangible assets typically assumed to be?

Zero, because a second market rarely exists.

Which of the following is an example of an intangible asset with unlimited life?

Trademarks

How is depreciation expense recorded on the financial statements?

As an operating expense on the income statement.

What type of depreciation method uses the number of units produced?

Units of activity method.

What is the diminishing balance method of depreciation?

Applying a constant percentage to the remaining book value.

How is the sale of a long-lived asset recorded if there is a loss?

Decrease cash and increase expense for the loss

How are accumulated depreciation accounts presented on the balance sheet?

Listed separately under each respective asset.