Tutorial 6

Question 1

Land Improvements

Answer 1

Land improvements are structural additions with limited lives that are made to land.

Question 2

Buildings

Answer 2

Buildings are facilities used in operations, such as stores, offices, factories, warehouses, and airplane hangars

Question 3

Equipment

Answer 3

Equipment includes assets used in operations, such as store check-out counters, factory machinery, delivery trucks, and airplanes.

Question 4

Useful life

Answer 4

Useful life is an estimate of the expected productive life, also called service life, of the asset for its owner.

Question 5

Residual value

Answer 5

Residual value is an estimate of the asset’s value at the end of its useful life.

Question 6

Depreciable cost

Answer 6

Depreciable cost is equal to the cost of the asset less its residual value.

Question 7

Units-of-activity method

Answer 7

Under the units-of-activity method, useful life is expressed in terms of the total units of production or use expected from the asset, rather than as a time period.

Question 8

declining-balance method

Answer 8

The declining-balance method produces a decreasing annual depreciation expense over the asset’s useful life.

Question 9

Intangible assets

Answer 9

Intangible assets are rights, privileges, and competitive advantages that result from the ownership of long-lived assets that do not possess physical substance.

Question 10

patent

Answer 10

A patent is an exclusive right issued by a patent office that enables the recipient to manufacture, sell, or otherwise control an invention for a specified number of years from the date of the grant.

Question 11

copyrights

Answer 11

Governments grant copyrights, which give the owner the exclusive right to reproduce and sell an artistic or published work.

Question 12

trademark

Answer 12

A trademark or trade name is a word, phrase, jingle, or symbol that identifies a particular enterprise or product.

Question 13

franchise

Answer 13

A franchise is a contractual arrangement between a franchisor and a franchisee.

Question 14

Goodwill

Answer 14

Goodwill represents the value of all favorable attributes that relate to a company that is not tied to any other specific asset. These attributes include exceptional management, desirable location, good customer relations, skilled employees, highquality products, and harmonious relations with labor unions.