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Accounting 207 > Chapter 9 > Flashcards

Chapter 9 Flashcards

1
Q

Depreciation

A

is the systematic allocation of the cost of an operational asset over its useful life

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2
Q

What does depreciation not mean?

A

the accumulation of cash for the replacement of an asset

-it does not mean wear and tear and obsolescence

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3
Q

What do we depreciate?

A
  • building
  • equipment
  • automobiles
  • furniture
  • land improvements
  • leasehold improvements
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4
Q

What do we never depreciate?

A

LAND!!!!!

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5
Q

Do we record appreciation?

A

no!!!!!!

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6
Q

What is included in cost?

A
  • acquisition cost: everything to get the asset ready to use except interest
  • remove nay purchase discount
  • installation fees
  • test runs
  • transportation
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7
Q

Why do we depreciate?

A

expense recognition concept(matching)

-expense of using the the asset is recorded in the period of revenue

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8
Q

What is razing added to?

A

-added to the cost of land

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9
Q

What is the adjusted journal entry time period for this section?

A

monthly and quarterly

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10
Q

What is the adjusted entry?

A

Dr: depreciation expense

Cr:Accumulated Depreciation

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11
Q

What is depreciation expense?

A

represents an estimate of how much of the estimate was used up this period

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12
Q

What type of asset is accumulated depreciation?

Discuss?

A

contra asset

represents how much has been used up since it was acquired

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13
Q

What is the formula for book value?

A

cost minus accumulated depreciation

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14
Q

Three methods of depreciation

A
  • straight line
  • double declining balance
  • units of production
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15
Q

What is the formula for straight line?

A

(cost-salvage)/useful life= depreciation expense

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16
Q

Double Declining Balance

A
  • results in higher depreciation in the early years

- used mostly for tax purposes

17
Q

units of activity method

A
  • useful life is expressed in terms of the total units of production or the use expected from the asset
  • usually suited to factory machinery
  • measure production in terms of units of output or machine hours used in operating machinery

examples: delivery equipment(miles driven)
airplanes(hours in use)

-not suitable for building or furniture

18
Q

The Fees for Land

A

1) cash price
2) title and attorney’s fees
3) real estate brokers’ commission
4) accrued property taxes and other liens assumed by the purchaser

19
Q

Discuss the what ultimately true about the depreciation methods?

A

-total depreciation expense is the same for all of them

20
Q

Can you use different methods for different purposes?

A

-yes

21
Q

Discuss deferred tax account

A

-creating a difference on the tax return an income statement

22
Q

Revenue Expenditures(aka)

A
  • expenses

- ordinary repairs and maintenance

23
Q

Capital expenditures(aka)

A

-assets

  • seldom occur
  • large amounts of $$$$$$
  • extended life
  • greater efficiency
24
Q

Depreciation is important to what time periods?

A

-future time periods

25
Q

Depletion

A

systematic allocation of the cost of a natural resource to future periods in which asses contribute services

dr: depletion expense
cr: accumulated depletion or asset

26
Q

Amortization

A

systematic allocation of the cost of an intangible asset to future periods in which the assets contribute services

dr: amortization expense
cr: accumulated amortization or asset

27
Q

Points on Intagible Assets

A
  • have no physical substance
  • provide future benefits
  • benefits are derived from legal rights
  • must acquired so they have a cost
  • have a limited life
28
Q

Examples of Intangible Assets

A

Examples of Intangible Assets

29
Q

Research and Development

A
  • costs are expensed in the period incurred
  • patents have to be purchased or defended to be an asset

-those developed in-house are treated as expenses

30
Q

Others names for salvage value

A
  • residual value

- salvage value

Accounting 207 (24 decks)

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