Long Term Assets Flashcards
1
Q
What is the cost principle for long term asset?
A
Sum of the purchase price and the expenditure needed to prepare the asset for the intended use.
2
Q
What is a long term asset?
A
Assets that are not used up within one year or the operating cycle (whichever is longer)
3
Q
Some examples of long term assets include:
A
Patents, copyrights, buildings, machinery, land
4
Q
What is a lump sum asset purchase?
A
Total cost of a combination purchase of PPE is separated on the basis of their relative market rate.
5
Q
What is depreciation?
A
Depreciation is the process of allocating the cost of an item of PPE to expense in the accounting period benefiting from its uses
