Module 5 - Chapter 10

Question 1

Accelerated depreciation methods

Answer 1

Record higher amounts of depreciation during the early years of an asset’s life and lower amounts in later years.

Question 2

Acquisition cost

Answer 2

Amount of cash and/or cash equivalents given up to acquire a
plant asset and place it in operating condition at its proper location.

Question 3

Appraised value

Answer 3

An expert’s opinion as to what an item’s market price would
be if the item were sold.

Question 4

Betterments (improvements)

Answer 4

Capital expenditures that are properly charged to asset accounts because they add to the service-rendering ability of the assets;
they increase the quality of services obtained from an asset.

Question 5

Book value

Answer 5

An asset’s recorded cost less its accumulated depreciation.

Question 6

Capital expenditures

Answer 6

Expenditures debited to an asset account or to an accumulated depreciation account.

Question 7

Depreciation

Answer 7

The amount of plant asset cost allocated to each accounting
period benefiting from the plant asset’s use.

• The straight-line depreciation method charges an equal amount of plant asset cost to each period.
• The units of-production depreciation method assigns an equal amount of depreciation for each unit of product manufactured or service rendered by an asset.
• The double-declining-balance (DDB) method assigns decreasing amounts of depreciation to successive periods of time.

Question 8

Extraordinary repairs

Answer 8

Expenditures that cancel a part of the existing accumulated depreciation because they increase the quantity of services expected from an asset.

Question 9

Fair market value

Answer 9

The price that would be received for an item being sold in
the normal course of business (not at a forced liquidation sale).

Question 10

Inadequacy

Answer 10

The inability of a plant asset to produce enough products or
provide enough services to meet current demands.

Question 11

Land improvements

Answer 11

Attachments to land, such as driveways, landscaping, parking lots, fences, lighting systems, and sprinkler systems, that have limited lives and therefore are depreciable.

Question 12

Low-cost items

Answer 12

Items that provide years of service at a relatively low unit cost,
such as hammers, paperweights, and drills.

Question 13

Obsolescence

Answer 13

Decline in usefulness of an asset brought about by inventions
and technological progress.

Question 14

Physical deterioration

Answer 14

Results from use of the asset—wear and tear—and the action of the elements.

Question 15

Plant and equipment

Answer 15

A shorter title for property, plant, and equipment; also
called plant assets. Included are land and manufactured or constructed assets such as buildings, machinery, vehicles, and furniture.

Question 16

Rate of return on operating assets

Answer 16

Net operating income/Operating assets. This ratio helps management determine how effectively it used assets to produce
a profit.

Question 17

Revenue expenditures

Answer 17

Expenditures (on a plant asset) that are immediately expensed.

Question 18

Salvage value

Answer 18

The amount of money the company expects to recover, less
disposal costs, on the date a plant asset is scrapped, sold, or traded in. Also called scrap value or residual value.

Question 19

Tangible assets

Answer 19

Assets that we can see and touch such as land, buildings, and
equipment.

Question 20

Useful life

Answer 20

Refers to the length of time the company owning the asset intends to use it.