Chapter 10

Question 1

Method that produces larger depreciation charges in the early years of an asset’s life and smaller charges in its later years.

Answer 1

Accelerated depreciation method

Question 2

Expenditures to make a plant asset more efficient or productive; also called improvements.

Answer 2

Betterments

Question 3

Asset’s acquisition costs less its accumulated depreciation (or depletion, or amortization); also sometimes used synonymously as the carrying value of an account.

Answer 3

Book value

Question 4

Additional costs of plant assets that provide material benefits extending beyond the current period; also called balance sheet expenditures.

Answer 4

Capital expenditures

Question 5

Change in an accounting estimate that results from new information, subsequent developments, or improved judgment that impacts current and future periods.

Answer 5

Change in an accounting estimate

Question 6

Right giving the owner the exclusive privilege to publish and sell a musical, literary, or artistic work during the creator’s life plus 70 years.

Answer 6

Copyright

Question 7

Method that determines depreciation charge for the period by multiplying a depreciation rate (often twice the straight-line rate) by the asset’s beginning-period book value.

Answer 7

Declining-balance method

Question 8

Process of allocating the cost of natural resources to periods when they are consumed and sold.

Answer 8

Depletion

Question 9

Major repairs that extend the useful life of a plant asset beyond prior expectations; treated as a capital expenditure.

Answer 9

Extraordinary repairs

Question 10

Amount by which a company’s (or a segment’s) value exceeds the value of its individual assets less its liabilities.

Answer 10

Goodwill

Question 11

Long-term assets (resources) used to produce or sell products or services; usually lack physical form and have uncertain benefits.

Answer 11

Intangible assets

Question 12

Rights the lessor grants to the lessee under the terms of a lease.

Answer 12

Leasehold

Question 13

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

Answer 13

Natural resources

Question 14

Repairs to keep a plant asset in normal, good operating condition; treated as a revenue expenditure and immediately expensed.

Answer 14

Ordinary repairs

Question 15

Exclusive right granted to its owner to produce and sell an item or to use a process for 20 years.

Answer 15

Patent

Question 16

Expenditures reported on the current income statement as an expense because they do not provide benefits in future periods.

Answer 16

Revenue expenditures

Question 17

Estimate of amount to be recovered at the end of an asset’s useful life; also called residual value or scrap value.

Answer 17

Salvage value

Question 18

Method that allocates an equal portion of the depreciable cost of plant asset (cost minus salvage) to each accounting period in its useful life.

Answer 18

Straight-line depreciation

Question 19

Measure of a company’s ability to use its assets to generate sales; computed by dividing net sales by average total assets.

Answer 19

Total asset turnover

Question 20

Method that charges a varying amount to depreciation expense for each period of an asset’s useful life depending on its usage.

Answer 20

Units-of-production depreciation

Question 21

Length of time an asset will be productively used in the operations of a business; also called service life or limited life.

Answer 21

Useful life