chapter 8 reading

Question 1

plant assets

Answer 1

tangible assets used in company operations that have a useful life of more than one accounting period

Question 2

plant assets are commonly used in

Answer 2

operations

Question 3

4 issues accounting for plant assets

Answer 3

1) computing costs of plant assets
2) allocating costs
3) accounting for subsequent expenditures to plant assets
4) recording disposal

Question 4

plant assets are recorded when

Answer 4

recorded at cost when acquired

Question 5

cost

Answer 5

all expenditures necessary to get an asset in place and ready for use

Question 6

to be recorded as part of the cost of plant asset, expenditure must be

Answer 6

-normal
-reasonable
-necessary in preparing it for its intended use

Question 7

cost of plant assets includes

Answer 7

purchase price
-taxes
-transportation charges
-insurance while in transit

Question 8

building account

Answer 8

cost if oyrchasing or constructing building used in operations

Question 9

construting building cost

Answer 9

materials, labor, and indirect overhead costs

Question 10

overhead

Answer 10

heat, lighting, power

Question 11

land improvements

Answer 11

additions to land and have limited useful lives like fences and parking lots

Question 12

land cost

Answer 12

cost necessary to make it ready for intended use (cost of removing also charged to land account)

Question 13

cash purcase of land improvements

Answer 13

land improvement debit
cash credit

Question 14

plant asset someties purchased as group in single transaction for

Answer 14

lump sum price

Question 15

what is group order of plant assets called

Answer 15

lumpsum purchase or bulk purchase

Question 16

deprecitation

Answer 16

process of allocating cost of plant asset to expense while in use

Question 17

factors that determine depreciation

Answer 17

1)cost
2)salvage value
3)useful life

Question 18

salvage value

Answer 18

estimate of assets value at end of its useful life

Question 19

useful life

Answer 19

length of time plan asset is used in companys operation

Question 20

is service life or useful life longer

Answer 20

useful

Question 21

inadequacy

Answer 21

inability of plant asset to meet its demands

Question 22

obsolesence

Answer 22

process of becoming outdated/no longer used

Question 23

straight line depreciation

Answer 23

charges the same amount for each period of the asset’s useful life

Question 24

straight line depreciation process

Answer 24

1) compute depreciable cost
2)divde depreciable cost by number of accounting periods in assets useful life (cost-salvage value/useful lifes in period)

Question 25

depreciable cost formula

Answer 25

assets total cost - salvage value

Question 26

units of production depreciation

Answer 26

charges a varying amount for each period depending on assets usage

Question 27

process of units of production depreciation

Answer 27

1) depreciation per unit
2) depreciation expense (depreciation per unit x units produced in period)

Question 28

revenue expenditures

Answer 28

cost that do not materially increase the plant assets life or capabilities

Question 29

capital expenditures

Answer 29

cost of plant assets that provide benefits for longer than current period

Question 30

ordinary reapairs

Answer 30

expenditures to keep assets in good operating condition

Question 31

betterments

Answer 31

expense that makes plant asset more productive

Question 32

natural resources

Answer 32

assets that are physically consumed when used lile timber

Question 33

depletion

Answer 33

process of allocating cost f natural resoruces to period when used

Question 34

intangible assets

Answer 34

nonphysical assets used in operations that give companies a competitive advantage

Question 35

indefinite life

Answer 35

no legal or economic reason matters that limits its useful life