Depreciation and fixed assets

Question 1

What does a depreciation affect?

Answer 1

A fixed asset

Question 2

Loss in value of a fixed asset due to wear and tear and the passage of time

Answer 2

Decrease value

Question 3

Method of matching the cost of fixed asset against the revenues that the fixed asset with help produce during it’s useful life

Answer 3

Allocated expense

Question 4

What does an amortization affect?

Answer 4

An intangible asset

Question 5

What is the one fixed asset that cannot depreciate under the generally accepted accounting principals?

Answer 5

Land

Question 6

What are the depreciable three?

Answer 6

1. The asset account
2. Depreciation expense
3. Accumulated depreciation

Question 7

Portion of the original cost of the asset that is assigned as an expense to the reporting period expected to benefit it’s use

Answer 7

Depreciation expense

Question 8

Contra account that adversely effects the value of the asset (continues to accumulate depreciation)
Book value = original cost - accumulated depreciation

Answer 8

Accumulated depreciation

Question 9

What is the book value

Answer 9

How much the asset is worth at it’s current state

Question 10

Account that never pays anything out of pocket for depreciation, but recognizes it as an expense

Answer 10

Non cash expense

Question 11

What are the 4 main issues that depreciation deals with?

Answer 11

1. Cost measurement
2. Matching revenues to expenses
3. Improve/ maintain assets
4. End of life options

Question 12

Amount originally paid for asset
-Will show in the T chart and depreciate by year

Answer 12

Original cost

Question 13

Estimated calue of a fixed asset at the end of it’s useful life

Answer 13

Salvage value

Question 14

What is the depreciation equation?

Answer 14

Depreciation value (total amt of depreciation = Original cost - salvage value

Question 15

Estimated determinable life of a fixed asset

Answer 15

Useful life

Question 16

What does SWAG stand for?

Answer 16

Scientific Wild Ass Guess

Question 17

What are the three methods of depreciation?

Answer 17

1. Straight line method
2. Double declining balance / accelerated depreciation method
3. Units of production method

Question 18

Depreciation cost basis of an asset is appointed equally over it’s estimated useful life expressed in terms of either months or years

Answer 18

Straight line depreciation

Question 19

What equations are used for the straight line method of depreciation?

Answer 19

Depreciation value = cost of the asset - estimated salvage value

Yearly depreciation = depreciable value / useful life

Question 20

Depreciation expense is calculated as a constant percentage of the assets book value at the beginning of each period

Answer 20

Double declining method of depreciation

Question 21

What are the equations used in the double declining method

Answer 21

Useful life of x years –> yearly depreciation = 1/x –> calculate percentage

Calculated percentage * 2 = Double declining percentage

Question 22

A method in which the depreciation expense is allocated to the assets use in operation
-Depreciation value is divided by an anticipated number of units of usage (ex. days, funerals, uses. …)

Answer 22

Units of production depreciation

Question 23

What are the equations for the units of production method of depreciation?

Answer 23

Depreciable value = cost of asset - salvage value

Per use depreciation = depreciable value / total useful life

Question 24

Depreciation value for intangible assets
-Straight line method
-No contra asset, just the book value that goes on the balance sheet
-Debit is made to ___ expense account, credit is made to intangible asset account

Answer 24

Amortization