Chapter 1

Question 1

Accelerated depreciation method

Answer 1

A depreciation method that produces larger depreciation charges during the early years of an asset’s life and smaller charges in the later years

Question 2

Amortization

Answer 2

A process of systematically allocating the cost of an intangible asset to expense over its estimated useful life

Question 3

Basket purchase

Answer 3

See lump sum purchase

Question 4

Book value

Answer 4

The original cost of plant and equipment or intangible asset less it’s accumulated depreciation or amortization

Question 5

Capital assets

Answer 5

See property plant and equipment

Question 6

Capital cost allowance CCA

Answer 6

The system of depreciation required by federal income tax law for federal income tax purposes

Question 7

Capital expenditures

Answer 7

Cost of PPE that provide material benefits extending beyond the current period. They are debited to PPE asset accounts and reported on the balance sheet

Question 8

Change in an accounting estimate

Answer 8

A change in a calculated amount used in the financial statements that results from new information or subsequent developments and from better insight or improved judgement

Question 9

Copyright

Answer 9

Arete granted by the federal government or by international agreement giving the owner the exclusive privilege to publish and sell musical, literary, dramatic, or artistic work during the life of the creator +50 years

Question 10

Cost

Answer 10

Includes all normal and reasonable expenditures necessary to get a PPE asset or intangible asset in place and ready for its intended use

Question 11

Declining balance depreciation

Answer 11

I depreciation method in which an asset depreciation charge for the period is determined by applying a constant depreciation rate [up to twice a straight line rate] each year to the assets book value at the beginning of the year. Also known as diminishing balance depreciation

Question 12

Depreciable cost

Answer 12

The total asset cost less residual value of the asset. Reflects the amount to be depreciated over the assets useful life

Question 13

Depreciation

Answer 13

The process of matching or allocating the depreciable cost of a tangible asset in a rational and systematic manner over the assets estimated useful life

Question 14

Derecognize

Answer 14

Assets are removed from accounting records either upon disposal or were no future economic benefits are expected from their use. Any gain or loss arising on derecognition is included in earnings in the period of the asset is disposed or void a future economic benefits

Question 15

Diminishing balance depreciation

Answer 15

See double declining balance depreciation

Question 16

Double declining balance depreciation

Answer 16

A depreciation method in which depreciation is determined at twice the straight-line rate. It is calculated as

Book value x 2/n, where n= Estimated useful life

Question 17

Drilling rights

Answer 17

An intangible asset to that gives the holder legal permission to extract oil and gas and or other minerals from the subsurface. Other forms of legal permission similar to drilling rights include mineral rights mining rights timber rights and water rights

Question 18

Fixed asset

Answer 18

She property plant and equipment she not she

Question 19

Goodwill

Answer 19

The amount by which the value of a company exceeds the fair market value of the company’s net assets if purchased separately: goodwill is not an intangible asset: goodwill is not amortized or depreciated but is instead subject to an annual impairment test

Question 20

Half year convention

Answer 20

A method of calculating depreciation for particular periods. Six months depreciation is taken for the partial period Regardless of when the asset was acquired or disposed of. Also known as the half year rule

Question 21

Impairment loss

Answer 21

Results when the book value or carrying value of PPE or an intangible asset is greater than it’s recoverable amount because of the annual impairment test

Question 22

In adequacy

Answer 22

A condition in which the capacity of the companies PPE is too small to meet the companies productive demands

Question 23

Intangible asset

Answer 23

Rights, privileges, and competitive advantages to the owner of identifiable assets used in operations that have a useful life of more than one accounting. But have no physical substance: examples include patents, Copyrights, drilling rights, leaseholds, franchises, and trademarks. Goodwill is not an intangible asset

Question 24

Land improvements

Answer 24

Assets that increase the usefulness of land but that have a limited useful life and are subject to depreciation

Question 25

Lease

Answer 25

A contract allowing property rental

Question 26

Leasehold

Answer 26

The name for the rights granted to the lessee By the lessor in a lease

Question 27

Leasehold improvement

Answer 27

An asset resulting from a leasee paying for alterations or improvements to the leased property

Question 28

Lessee

Answer 28

The party to A lease that secures the right to possess and use the property

Question 29

Lessor

Answer 29

The party to a lease that grants to another the right to possess and use property

Question 30

Lump sum purchase

Answer 30

Purchase of PPE in a group with a single transaction for a lump sum price. The cost of the purchase must be allocated to individual asset accounts: also called a basket purchase

Question 31

Natural resources

Answer 31

Assets that are physically consumed when used: examples include timber, mineral deposits, and oil and gas fields; also called wasting assets