ch7 Flashcards
A long-term asset is recorded at the:
Cost of the asset plus all costs necessary to the asset ready for use.
To capitalize an expenditure means to record the expenditure as a(n):
Asset
An exclusive 20-year right to manufacture a product or to use a process is a:
Patent.
Which of the following is properly recorded as an intangible asset?
A purchased patent.
Which of the following is not reported as an intangible asset in the balance sheet?
Research and development.
Which of the following expenditures should be recorded as an expense?
Ordinary repairs and maintenance.
Which of the following expenditures should be recorded as an asset?
An addition which increases future benefits.
Which of the following expenditures should be capitalized?
An improvement to a tangible asset.
Which of the following correctly describes the nature of depreciation?
Depreciation represents the allocation of the cost of property, plant, and equipment over its service life.
Depreciation in accounting is the:
Allocation of an asset’s cost to an expense over time.
Accumulated depreciation is:
A contra-asset.
The balance in the Accumulated Depreciation account represents
The amount charged to depreciation expense since the acquisition of the plant asset.
The asset’s cost less accumulated depreciation is called:
Book value.
The book value of an asset is equal to the
Asset’s cost less accumulated depreciation.
Which of the following depreciation methods typically results in the highest depreciation expense during the first year of an asset’s life?
Double-declining-balance method.
Which of the following will result in higher depreciation expense in the first year of the asset’s life?
Short service life and low residual value.
Which of the following will maximize net income by minimizing depreciation expense in the first year of the asset’s life?
Long service life, high residual value, and straight-line depreciation.
The amount of the gain on the sale of equipment equals:
The selling price minus the book value of the equipment.
Which of the following statements is false regarding the amortization of intangible assets?
The service life of an intangible asset is always equal to its legal life
Which of the following statements is true regarding the amortization of intangible assets?
The expected residual value of most intangible assets is zero.
Which of the following intangible assets is not amortized?
Goodwill.
The amount of the gain on the sale of equipment equals:
The selling price minus the book value of the equipment.
If equipment is retired, which of the following accounts would be debited?
Accumulated depreciation.
Return on assets is equal to:
Net income divided by average total assets.
Return on assets is equal to:
Profit margin times asset turnover.
The company’s profitability on each dollar invested in assets is represented by which of the following ratios:
Return on assets.
