Test 2 Ch. 18 + 20

Question 1

intransit

Answer 1

merchandise and other types of inventory that have left the shipping dock of the seller, but not yet reached the receiving dock of the buyer

Question 2

FOB shipping point

Answer 2

Selling company transfers ownership to the buyer at the place at the place of of sale (shipping point) before the inventory is in transit

Question 3

FOB destination

Answer 3

Selling company transfers owner to the buys at the place of delivery (after transit is completed)

Question 4

depreciation expense

Answer 4

part of the cost of property, plant, and equipment (physical asset) that a company allocates as an expense to each accounting period in which the company uses the asset

Question 5

accumulated depreciation

Answer 5

total amount of depreciation expense recorded over the life of an asset to date; portion of the asset’s cost that has been “used up” to earn revenues to date

Question 6

residual value

Answer 6

estimated scrap value of an asset at the end of its lease or its economic or useful life; owner’s equity is taken to be the residual of assets minus the liabilities

Question 7

historic cost

Answer 7

the cost recorded at the time the transaction occurred

Question 8

MACRS

Answer 8

modified accelerated cost recovery system; accelerated depreciation method acceptable under the IRC and used by companies for income tax purposes

Question 9

capital expenditures

Answer 9

cost that increases the benefits a company will obtain from an asset

Question 10

operating expenditures

Answer 10

cost that only maintains the benefits that a company originally expected from an asset

Question 11

impairment

Answer 11

occurs when the expected future cash flows from an asset are less than the book value of that asset

Question 12

intangible assets

Answer 12

company’s long-term assets that do not have a physical substance