MBA 500 Accounting Exam 2: Ch 6
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All ordinary and necessary costs the firm incurs to get the and ready for its intended use are considered part of the ________.
Expenditures should be _____ if the item acquired will have an economic benefit to the entity that extends beyond the end of the current fiscal year.
Expenditures for preventative maintenance and normal repairs, even though they are needed to maintain the usefulness of the asset over a number of years, are _____as incurred.
Includes all costs related directly to purchase or construction
Include all costs incurred in acquiring and preparing it for use.
the process of allocating the cost of tangible assets to expense in a systematic and rational manner to those periods expected to benefit from the use of the asset.
The difference between the cost of an asset and the accumulated depreciation on that asset is the ________ of the asset.
net book value
Note that ____ is not involved in the depreciation expense entry.
What are all expenditures necessary to acquire the asset and make it ready for intended use?
What is the estimate of the expected life based on need for repair, service life, and vulnerability to obsolescence?
What is the estimate of the asset's value at the end of its useful life?
What are the 3 depreciation methods?
- 1. straight-line method
- 2. units of activity method
- 3. declining-balance method
Which depreciation is:
Expense is same amount for each year.
Depreciable cost is cost of the asset less its salvage value.
Which depreciation method is:
Companies estimate total units of activity to calculate depreciation cost per unit.
Expense varies based on units of activity.
Depreciable cost is cost less salvage value.
units of activity
Which depreciation method is:
Decreasing annual depreciation expense over the asset’s useful life.
Rate is double the straight-line rate.
Rate applied to book value.
______ are expenditures to maintain the operating efficiency and productive life of the unit.
What are costs incurred to increase the operating efficiency, productive capacity, or useful life of a plant asset.
additions and improvements
What are two ways to dispose of plant assets?
retirement or sale
_____are rights, privileges, and competitive advantages that do not possess physical substance.
What are some common types of intangible assets?
- Franchises or licenses
- Trademarks or trade names
What is the process of spreading the cost of an intangible asset over its useful life?
The cost of tangible assets is depreciated, the cost of intangible assets if ______.
____ intangibles are recorded at cost and includes all costs necessary to make the intangible asset ready for its intended use.
________ intangibles are generally expensed, and only capitalize direct costs incurred in perfecting title to the intangible, such as legal costs.
Internally created intangibles
What is an amortizable intangible asset represented by the cost of improvements made to a leasehold by the lessee?
What is an amortizable intangible asset represented by a government sanctioned monopoly over the use of a product or process?
What is an amortizable intangible asset represented by a right to the exclusive use of an identifying mark?
What is an amortizable intangible asset represented by the legally granted protection against unauthorized copying of a creative work?
What is a nonamortizable intangible asset arising from the purchase of a business for more than the fair market value of the net assets acquired?
The purchaser is willing to pay more than the fair market value of the business because the profits expected to be earned from the investment will generate an adequate return on the investment. This describes _____.
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