Chapter 18 – Property, Plant and Equipment

Question 1

“Accelerated method of depreciation”

Answer 1

method of depreciating asset cost that allocates greater amounts of depreciation to an asset’s early years of useful life

Question 2

“amortization”

Answer 2

process of periodically transferring acquisition cost of intangible assets with estimated useful lives to an expense account

Question 3

“capitalized costs”

Answer 3

all costs recorded as part of an asset’s costs

Question 4

“computer software”

Answer 4

1. an intangible asset

2. written programs that instruct a computer’s hardware to do certain tasks

Question 5

“copyright”

Answer 5

1. intangible asset
2. exclusive right granted by fed govt to product, publish, sell a literary or artistic work for a period equal to the creator’s life plus 70 years

Question 6

“declining balance method”

Answer 6

accelerated method of depreciation in which an asset’s book value at the beginning of the year is multiplied by a constant percentage (equal to double the straight line rate) to determine depreciation for the year.

Question 7

“depletion”

Answer 7

allocating the cost of a natural resource to expense over the period in which the resource produces revenue

Question 8

“double-declining-balance method”

Answer 8

method of depreciation that uses a rate equal to twice the straight-line rate and applies that rate to the book value of the asset at the beginning of the year

Question 9

“franchise”

Answer 9

1. intangible asset

2. right to exclusive dealership granted by govt unit or business entity

Question 10

“gain”

Answer 10

disposition of an asset for more than its book value

Question 11

“goodwill”

Answer 11

1. intangible asset

2. value of a business in excess of the net value of its identifiable assets

Question 12

“impairment”

Answer 12

situation that occurs when the asset is determined to have a market value or value in use less than its book value

Question 13

“income tax method”

Answer 13

1. method of recording the trade-in of an asset for income tax purposes.
2. does not permit a gain or loss to be recognized on the transaction

Question 14

“intangible assets”

Answer 14

1. assets that lack physical substance

2. goodwill, patents, copyrights, computer software

Question 15

“loss”

Answer 15

disposition of an asset for less than its book value

Question 16

“net book value” “book value”

Answer 16

1. cost of an asset - accumulated depreciation, depletion or amortization

Question 17

“net salvage value”

Answer 17

salvage value of an asset - any costs to remove or sell the asset

Question 18

“patent”

Answer 18

1. intangible asset
2. exclusive right given by US Patent Office to manufacture and sell an invention for period of 17 years from date patent is granted

Question 19

“real property”

Answer 19

assets such as land, land improvements, buildings, and other structures attached to the land

Question 20

“recoverability test”

Answer 20

test for possible impairment that compares asset’s net book value with estimated net cash flows from future use of the asset

Question 21

“residual value” “salvage value” “scrap value”

Answer 21

1. estimate of the amount that could be obtained from the sale or disposition of an asset at the end of its useful life

Question 22

“sum-of-the-years’-digits method”

Answer 22

method of depreciating asset costs by allocating as expense each year a fractional part of the asset’s depreciable cost, based on sum of the digits of the number of years in the asset’s useful life

Question 23

“tangible personal property”

Answer 23

assets such as machinery, equipment, furniture, fixtures that can be removed and used elsewhere

Question 24

“trade name” “brand name”

Answer 24

1. intangible asset

2. exclusive business name registered with US Patent Office

Question 25

“trademark”

Answer 25

1. intangible asset

2. exclusive business symbol registered with US Patent Office

Question 26

“units-of-production method”

“units-of-output method”

Answer 26

method of depreciating asset cost at the same rate fr each unit produced during each period