Studied by 5 peopleLong lived assets
________ are assets that provide benefits over a length of time (a year or more). They help provide goods or services, but the asset will not be sold.
productive assets
Long lived assets can also be called ________.
tangible assets and intangibles assets
The two categories for long-lived assets are ________.
fixed assets
Tangible assets, also known as ________, are physical assets that are subject to depreciation (land, buildings, equipment).
Intangible assets
________ are non-physical assets that have a limited life. They are created through legal documents and are subject to amortization (patents, logos, trademarks, slogans).
Goodwill and trademarks
________ have an unlimited life and are NOT amortized.
Equation for Net Book Value (TANGIBLE)
Equation for Net Book Value (INTANGIBLE)
land improvements
Tangible assets can include ________ that can enhance the asset and its functionality (walkways, sprinklers, roadways, fencing, etc).
Land
________ is not depreciable.
Construction in progress
_________ relates to the construction of tangible assets such as buildings and equipment.
cost principle
The ________ has acquisition costs like the initial purchase to prep assets for use (transportation, construction, etc).
capitalizing the cost
When costs are recorded as assets it is called ________, which delays it's recording as an expense.
increase; decrease
Capitalizing costs causes assets to ________ on the balance sheet and expenses to ________ on the income statement.
Purchase cost Legal fees Survey fees Title search fees
The capitalized costs for land:
Purchase cost Construction cost Legal fees Appraisal fees
The capitalized costs for buildings:
Purchase cost Construction cost Transportation cost Sales taxes Installation fees
The capitalized costs for Equipment:
basket purchase
A(n) ________ is when assets like land, equipment, and buildings are bought together.
Allocation
________ for each asset is determined by the relative fair market value of each asset.
Ordinary repairs and maintenance. Extraordinary repairs, replacements, and additions.
The two types of expenditures:
WANTED
Ordinary repairs and maintenance are ________ changes and small expenditures, which are expensed on the income statement. They don't extend the life of the asset.
NEEDED
Extraordinary repairs, replacements, and additions are ________ changes and are large expenditures. The asset's productivity is increased. They are capitalized.
cost allocation
Depreciation is a ________ process that matches cost of operational assets with periods of its useful life.
balance sheet; income statement
To record depreciation, the acquisition cost of an asset moves from the ________ to the ________ as an expense.
Debit Income statement
What is the normal balance of Depreciation Expense and what financial statement is it on?
Credit Balance sheet
What is the normal balance of Accumulated Depreciation and what financial statement is it on?
Depreciation calculations
The acquisition cost (including capitalized cost), estimated useful life, and the estimated residual (aka salvage) value (what the asset is worth if you sell it is all information you need to know to do:
Straight Line Method
The easiest and most widely used method. It indicates that depreciation expense is a constant amount each year, accumulated depreciation increases by an equal amount each year, and book value decreases the same amount each year.
Equation for Depreciation Expense (Straight Line Method)
Units of Production
________ is used if the life of an asset is generally measured in terms of units of production.
Equation for Depreciation Expense (Units of Production Method)
Declining Balance
A greater depreciation expense is taken from the asset in the earlier years of its life versus its later years.
Equation for Depreciation Expense (Declining Balance Method)
least and latest
The ________ says taxpayers want to pay the least tax that is legally permitted and want to pay on the latest possible date.
Its value decreases and it can't be recovered.
An asset is impaired when:
Impairments
________ represent a lower asset value than the assets carrying value.
gain
A(n) ________ has a normal credit balance.
loss
A(n) ________ has a normal debit balance.
Update depreciation to the date of disposal.
Record the disposal.
Two adjusted journal entries are required for the disposal of an asset to.....
Debit Cash Debit Accumulated Depreciation Credit Equipment Credit Gain on Disposal
Journal entry if there is a gain on disposal:
Debit Cash Debit Loss on Disposal Debit Accumulated Depreciation Credit Equipment
Journal entry if there is a gain on disposal:
Debit Loss
There is ________ IF cash received is less than asset's book value.
Equation for annual Depreciation:
Amortization
________ is similar to depreciation, but it is specifically used for intangible assets. It writes off the cost of an asset over its useful or legal life.
Trademarks
Slogans, logos, or names associated with a specific business.
Copyrights
An exclusive right granted by the federal government to protect properties.
Patents
An exclusive right granted by the federal government to sell or manufacture an invention.
Licensing Rights
Grant limited permission to use a product or service according to specific terms and conditions.
Technology Assets
Software and web development work.
Franchises
Provides legally protected rights to sell products or provide services purchased by a franchise from the franchisor.
Goodwill
Occurs when one company buys another company. It is not amortized. Purchased ________ is considered an intangible asset.
Equation for Goodwill:
purchased
The cost of intangible assets are recorded as assets if they've been ________.
research and development expenses
If the asset is self constructed, the cost is reported as ________.
amortized
Intangible assets with unlimited lives are not ________. Intangible assets with limited lives are capitalized and later ________.
Depreciation
________ is a cost allocation process that matches cost of operational assets with periods of its useful life.
Credit Gain
There is ________ IF the cash received is greater than the assets book value.
greater
Gains for intangible assets are the result of amounts received being ________ than their book values.
less
Losses for intangible assets are the result of amounts received being ________ than their book values.
Fixed asset turnover analysis
_________ is used to see how well long lived assets were used to generate revenue.
Equation for calculating the average of fixed assets:
Equation for the fixed asset turnover ratio:
great efficiency
A higher fixed asset turnover ratio implies ________.
Note 
Flashcard (45)