Fixed Assets and Intangible Assets

Flashcards for reviewing fixed assets and intangible assets lecture notes.

What are Fixed Assets?

Long-term or relatively permanent assets such as equipment, machinery, buildings, and land.

What are the Characteristics of Fixed Assets?

They exist physically, are owned and used by the company, and are not offered for sale as part of normal operations.

What Items are Classified and Recorded as Fixed Assets?

Land, buildings, and equipment that normally last more than a year and are used in normal operations.

What are Investments in Accounting?

Long-lived assets not used in normal operations, held for future resale, and reported in the Investments section of the balance sheet.

What Costs are Included in the Cost of a Fixed Asset?

Costs necessary for preparing the fixed asset for use.

What Costs are Typically Recorded as Expenses Rather Than Fixed Assets?

Vandalism, mistakes in installation, uninsured theft, damage during unpacking, and fines for not obtaining proper permits.

What are the three stages of a plant asset's life cycle?

Acquisition, Usage, and Disposal

What is Depreciation?

The periodic recording of the cost of fixed assets as an expense over their useful lives.

What Factors Can Cause Depreciation?

Physical factors like wear and tear and functional factors like obsolescence.

What are the Three Main Factors in Computing Depreciation?

Capitalized Cost, Estimated Useful Life, and Estimated Residual Value

What is Estimated Residual Value (Salvage Value)?

The amount the company expects to receive upon disposition of the asset.

What are the Three Most Commonly Used Depreciation Methods?

Straight-line method, Units-of-output (production) method, and Double-declining-balance method.

How are Revenue Expenditures (Costs that Benefit Only the Current Period) Accounted For?

Ordinary maintenance and repairs are recorded as increases to Repairs and Maintenance Expense.

How are Capital Expenditures (Costs that Improve the Asset or Extend its Life) Accounted For?

Asset improvements are recorded as increases to fixed asset accounts; extraordinary repairs are recorded as decreases in accumulated depreciation accounts.

What are Intangible Assets?

Patents, copyrights, trademarks, and goodwill that are used in operations but do not exist physically.