Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

Comm 217 > chapter 8: depreciation of all type of thangs > Flashcards

chapter 8: depreciation of all type of thangs Flashcards

1
Q

long lived assets

A

tangible or intangible resources owned by a business

used in operation to produce benefits over several years

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

what are the long term assets?

A

land

equipment

property

biological assets

natural ressources

intangibles

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

does land record depreciation? Why?

A

nah boy

it never becomes obsolete (unless you destroy the or some thing of the sort)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Caan land be impaired in value?

A

yeee

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

what re biological assets?

A

living things that you own

plants

animals

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

what is another frequent term for intangibles?

A

intellectual property

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

fixed asset turnover ration

formula and meaning

A

how is management using property, plant, and equipment to generate revenues?

operating revenues (net sales) / average net fixed assets

measures the sales dollar generated by each dollar of fixed assets used

higher ratio is gyuer

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

the cost principle

A

all costs incurred in acquiring long lived asset, placing it for operations, and preparing it for use should be recorded in designated assets account

added to purchase price of assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

what does it mean for costs to be capitalized?

A

when they are recorded as assets on statement of financial position instead of expenses on statement of earnings of the current period

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

acquisition cost of an asset

A

the amount recorded for the purchase

net cash-equivalent paid or the be paid for the asset

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

what are the acquisition methods

A

for cash

for debt

for equity (or other non cash cosniderations)

by construction

basket purchase of assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

operating lease

A

short term leases

does not transfer sub tally all risks and rewards of ownership from lesser of the lessee

not recorded on statement of financial position as liabilities

assets not included in fixed assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

finance lease (capital lease)

A

long term leases

acquisition of assets reported in statement of financial position

transfers substantially all risks and rewards of ownership from lesser to lessee

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

capitalized interest

A

interest on loans attributed to construction assets until its ready for use

reduces company total interest expense until asset is ready for use

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

basket purchase

A

acquisition of two or more assets in single transaction for single lump sum

cost of each asset must be measured and recorded separately

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

expenditure

A

payment of money to acquire goods or services

can be recorded as assets or expenses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

are expenditures and expenses the same thing?

A

nah boy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

how are classified expenditures that are made AFTEr an asset was purchased?

A

ordinary repairs and maintenance or revenue expenditures

extraordinary repairs and betterments

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

ordinary repairs and maintenance

A

expenditures for normal operating upkeep of long lived assets

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

revenue expenditures

A

maintain productive capacity of the asset during the current accounting period only

are recorded as expenses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

extraordinary repairs

A

infrequent expenditures to enhance the asset’s economic selfness in the future

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

betterments

A

costs incurred to enhance the productive or service potential of a lang lived asset

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

capital expeniditures

A

increase productive life , operating efficiency, or capacity of the asset

recorded as increases in assets accounts, not as expenses

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

depreciation

A

process of cost allocation, not to know the market value of an asset

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

carrying amount (book value)

A

acquisition cost of an asset - depreciation and any write offs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

how do you calculate the remaining life of an asset

A

(carrying amount / acquisition cost) * estimated useful life

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

estimated useful life

A

management’s estimate of the asset’s useful economic life to the the company

not total economic life to all potential users

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

continuity assumption

A

business must consider that they will continue to remain active in a foreseeable future and not liquidate

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

residual salvage value

A

estimated amount to be recovered - disposal costs

all at the end of estimated life of an asset

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

componentization of assets

A

depreciating different assets separately

considering that different assets have different lasting useful lives, remaining life, and residual value

31
Q

what are the three most common depreciation methods?

A

straight line

units of production

declining (or diminishing) balance

32
Q

straight line method

A

most used

depreciation is calculated equally each year of an asset’s useful life until it gets to the residual value

depreciation expense is constant amount each year

accumulated depreciation increases equally each year

carrying amount decreases by same amount each year

33
Q

units of production method

what is the formula

A

allocates the cost of an asset over its useful life based how much it has produced in the period and how much it can produce

((cost - residual value) / estimated total production) * actual production

= depreciation expense

34
Q

why is the units of production method a variable expense?

A

depreciation expense varies directly with production, or use

carrying amount and accumulated depreciation will fluctuate each year

35
Q

declining balance method

also give formula

A

reflects the declining benefits that an asset will provide each year of use

also called, accelerated depreciation

(cost - accumulated depreciation) * 2 / useful life

= depreciation expense

accumulated depreciation and depreciation expense are smaller each year

36
Q

when do you choose usually the declining balance method?

A

when an asset is considered to be more productive in its earliest years, and that it decreases a lot in its latter years

37
Q

what are the two important differences between declining balance method and the two other methods

A

in the formula of the declining balance method, it doesn’t include residual value, but the accumulated depreciation (which increases each year)

since accumulated depreciation can’t make the carrying amount below the residual value, the depreciation expense of the last year might need to be reduced and formula might be disregarded

38
Q

what is the asset half year rule?

A

since calculating depreciation can be complicated if an asset isn’t actually bought on January 1 of the year, some companies assume they bought their assets halfway through the year

39
Q

can you identify if any company will have higher net earnings in the long term if they use straight line or accumulated depreciation?

A

nah boy

at first, straight line will have higher net earnings but in the latter years, accumulated depreciation will be higher

net earnings would come back to the same technically

40
Q

what happens when there is a change in estimate in residual value, expected useful of an asset, or both?

A
  1. first you calculate all the accumulated depreciation from the years before you changed the estimate
  2. then, you find the carrying amount which is the original acquisition cost - the accumulated depreciation
  3. that carrying amount, you subtract to it the new residual value if there is one which give the new depreciable amount
  4. from that amount, you divide the remaining years from the new estimate
41
Q

why do managers use the straight line method?

A

asset is expected to provide benefits evenly over time

easy to explain and use

in early years, provide higher net earnings

42
Q

what is an asset’s fair value?

A

amount at which an asset can be bought or sold

43
Q

why would investors be interested in an asset’s fair value?

A

adjusted historical costs are not relevant for their decisions or analysis of cash flows

44
Q

what is the value in use

A

fair value for long term assets

measured at present value (or current cash equivalent values) of future cash flows expected to be derived from the use of the asset over time

45
Q

what are the two steps required to assess assets for impairment?

A
  1. test for impairment
  2. computation of impairment loss
  3. you write down the asset to its recoverable amount
46
Q

when does impairment occur

A

when events or changed circumstances cause the carrying amount of assets to exceed recoverable amount

carrying amount > recoverable amount

47
Q

computation of impairment loss

A

carrying amount - recoverable amount

48
Q

can an impairment loss be recovered in the future?

A

yeee boyyyy

49
Q

what are the types of disposals when companies decide not to use their assets for all their life?

A

sale

trade-in

retirement

50
Q

if a disposal happens, at what date must the depreciation of an asset be recorded?

A

at the date of the disposal

51
Q

how can a gain or loss on disposal occur?

A
  1. depreciation expense is based on estimates that may differ from actual experience
  2. depreciation is based on original cost, not current market value
52
Q

why are natural resources called wasting assets?

A

because they become depleted

53
Q

what is depletion

A

the systematic and rational allocation of the cost of natural resource over the period of exploitation

54
Q

is depletion considered en expense? why?

A

it is not considered an expense

it turn into an asset that the company now uses to sell or utilize

55
Q

how does one calculate the depletion rate?

A

dividing (total acquisition - residual value) / estimated units that can be withdrawn

like the units of production depreciation method

56
Q

how can intangibles’ lives be defined?

A

definite life

indefinite life

57
Q

how are recorded the costs of obtaining an intangible?

A

as expenses

58
Q

definite life of an intangible

A

recorded on a straight line basis over useful life called amortization

no residual balie

59
Q

amortization

A

straight line basis recording of the acquisition cost of the intangible over its useful life

amortization expense included in statement of earnings

60
Q

indefinite life of intangible

A

no amortization

tested for impairment instead (carrying amount decreases if present)

61
Q

goodwill

A

most reported intangible

favorable reputation of a company

only way to report it as an asset is to buy a company

purchase price - all net assets of company purchased

62
Q

examples of intangibles

A

goodwill

trademarks

patents

copyright

franchise

technology

licenses an operating rights

leaseholds

63
Q

trademarks

A

exclusive right to own special name, image, or slogan

can be renewed every 15 years

those with definite lives amortized in straight line basis

64
Q

patents

A

granted by Big G for invention

exclusive right given tot he owns to use, manufacture and sell new product

lasts for period of 20 years

65
Q

copyright

A

exclusive right to publish, use, and sell a literary, musical, or artistic artwork

lasts less than 50 years after authors’ death

66
Q

franchise

A

contractual right to sell certain products or services, use certain trademarks, or perform activities in a geographical region

life of franchise depends of a contract

67
Q

technology

A

costs for computer software and web development

has increased significantly in recent years

68
Q

licenses an operating rights

A

obtained through agreements with governmental units and agencies

permit owners to use public property in performing their activities

69
Q

leaseholds

A

right granted to a lessee under lease contract

right to use specific asset

70
Q

is research development an intangible asset?

A

naaah boooyyy

its the expense recorded when you develop intangible assets or other shit

71
Q

are gain and losses affecting the cash flows?

A

they affect it indirectly

they affect net earnings which in turn affects computation of cash flows from operating activities

72
Q

are gain and losses of disposal of long lived assets affecting the cash flows?

A

they affect it indirectly

they affect net earnings which in turn affects computation of cash flows from operating activities

73
Q

how do gains on disposal of long term assets affect net earnings?

A

it reduces it

74
Q

how do losses on disposal of long term assets affect net earnings?

A

it increases it

Comm 217 (18 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions