Introduction to Financial Accounting - Chapter 8

These flashcards cover key concepts and definitions from Chapter 8 of the Introduction to Financial Accounting lecture notes.

What are the two main types of noncurrent assets?

Tangible and Intangible assets.

What costs should be capitalized when acquiring a noncurrent asset?

Purchase price, installation costs, transaction costs, and transportation costs.

Define impairment in the context of noncurrent assets.

Impairment occurs when an asset is expected to generate future benefits in excess of its book value.

What is the general rule for post-acquisition expenditures for noncurrent assets?

If the expenditure is material and increases future benefits, capitalize it; otherwise, expense it.

List the three methods for allocating depreciation of tangible assets.

Straight-line method, double-declining method, and units of production method.

What is the difference between amortization and depreciation?

Amortization is for intangible assets, while depreciation is for tangible assets.

What is goodwill in terms of business acquisition?

Goodwill is the excess paid over the fair value of the net assets acquired.

What journal entry is made when an asset is impaired?

Debit Impairment Loss and credit the asset impaired.

What happens to purchased intangibles with indefinite lives?

They are not amortized; instead, they are tested annually for impairment.

How is the depreciation expense calculated using the straight-line method?

(Cost – Residual Value) * 1/Useful Life.