Accounting 2110: Test 3; Ch 6-7

What is a capital expediture

increase of the expected life/productivity of an asset

which factors do you not need to calculate depreciation on plant and equipment?

Depreciation is the difference between market and book value? T/F

False

The cumulative amount of PPE already expensed is

Accumulated Depreciation

which method od depreciation allocates an equal amount of asset;s cost over each year of the asset’s life?

Straight Line

What is included in the cost of land only (not improvements)

intangible assets are recorded at cost, which is any expenditure necessary to aquire the asset and prepare it for use

true

[ (1/Useful Life) * 2] * Cost of asset

Double Declining Balance

what does the inventory amount on the balance sheet become with a sale

cost of goods sold

when a unit of inventory was purchased for 100 and now has a NRV of 50, should the inventory be written down

yes

when writing down inventory due to lower of cost or NRV rule, which account is decreased

Inventory

when goods are FOB shipping Point at the end of the period ( and goods have shipped), they should be included in the inventory count of

the buyer

inventory account is updated after every sale and every purchase under the perpetual inventory system

True

Earliest purchase are the first sold & the more recent purchases are included in ending inventory. this uses what costing method

FIFO

this inventory costing method smooths/allocates the cost of goods available for sale

weighted average

inventories do not include:

items held by consignment

Which inventory costing method results in a more realistic amount for income b/c it matches current cost against revenue

LIFO

this transaction would NOT result in an entry to the inventory of the buyer’s accounting records

payment of freight by the seller for the goods received