Ch.8

Question 1

Land

Answer 1

Not depreciated, unlimited life, cost include real estate fees, clearing, etc.

Question 2

Land Improvements

Answer 2

Additions to land. Ex. Parking lots

Question 3

Change in Estimate

Answer 3

Book value(beg. year of change)- Revised S.V 
/ Revised Remaining Useful Life

Question 4

Asset Turnover Ratio

Answer 4

Net Sales

/ Avg. Total Assets

Question 5

Straight-Line Depreciation

Answer 5

Cost - Salvage Value
/ Useful life

Same every year

Question 6

Double-Declining-Balance Depreciation

Answer 6

1. 100% / useful years = %
2. Double % from step 1
3. % from Step 2 x beg. Book value

Question 7

Book Value

Answer 7

Cost - Accumulated Depreciation

*after useful life book value will be S.V

Question 8

Units of Production Depreciation

Answer 8

1. Cost - Salvage Value
   / total units = dep. per unit
2. X units produced in period

Question 9

Lump Sum Purchases

Answer 9

• Plant assets purchased as group
• allocate cost on appraised value
• add all appraised values & divide each asset to find %
  cost X % = apportioned cost

Question 10

Partial Year depreciation

Answer 10

DATES!!!! CLOSEST TO THE 1st

Straight line X fraction of year left. Starting on beg of month closest to 1st !

Question 11

Ordinary Repairs

Answer 11

• Does not increase life or productivity

- debit repairs expense

Question 12

Betterments/ Extraordinary Repairs

Answer 12

• increase efficiency & useful life

- Debit plant asset

Question 13

Discarding Assets

Answer 13

• before discarding, bring depreciation up to date
• fully depreciated: Debit A/D, Credit Asset
• partially depreciated: Debit A/D & Loss on disposal(book value), Credit Plant asset

Question 14

Depletion

Answer 14

-for natural resources
Cost-Salv Value/total units
x units in period

Question 15

Intangible Assets

Answer 15

Non physical assets

Used in operations

Question 16

Intangible Assets Examples

Answer 16

Patent (20yrs) 
Copyright (life+70yrs)
Franchise & licenses -life 
Trademark -life
Leasehold&improvements - life

Question 17

Goodwill

Answer 17

Intangible asset NOT Amortized

Question 18

Amortization

Answer 18

Cost/useful life (legal life)

Question 19

Selling Assets

Answer 19

1. Cash = book value
   No gain no loss
2. Cash greater than book value (GAIN-credit)
3. Cash less than book value (LOSS- debit)