Week 6

Question 1

Tangible Substance

Answer 1

physical substance

ex) land

Question 2

Intangible Substance

Answer 2

ex) patents, copyrights, franchises

Question 3

Capital

Answer 3

funds for purchases of plant, property, and equipment

Question 4

Operating

Answer 4

Income statement related

revenue and expenses

Question 5

Acquisition Cost

Answer 5

anything involved with the acquisition of the good

expense

Question 6

Accumulated Depreciation

Answer 6

Balance Sheet

Question 7

Current Year Depreciation

Answer 7

expense

income statement

Question 8

Residual Life

Answer 8

= Salvage Life

Question 9

Straight Line Method

Answer 9

(Cost-Residual Value) X 1/useful life

depreciation expense is constant every year

Question 10

Units of Production

Answer 10

(Cost - Residual)/Est. Total Production
x Actual Production that occurred

Question 11

Double Declining Balance Method

Answer 11

Occurs when an asset is more productive when newer

Question 12

DD Balance Method

Answer 12

is an accelerated depreciation method

Question 13

The San Francisco Giants decide to sell all their batting practice equipment.
The equipment had an original cost of $12,000 and was purchased 6 years ago and was estimated to last a total of 10 years.

Salvage value estimated at $1,000.

Using straight line: dep * 6?
What is BV?

Answer 13

11,000/10 x 6 = 6600

Book Value: 12000-6600 = 5400

Question 14

Book Value

Answer 14

Cost - Accumulated Depreciation

Question 15

Goodwill

Answer 15

intangible asset

Question 16

Purchased and intangible assets

Answer 16

intangible assets are recorded at historical cost only if they have been purchased

Question 17

Intangible Assets can either be

Answer 17

definite or indefinite life

Question 18

definite life

Answer 18

straight line method

Question 19

indefinite life

Answer 19

reviewed annually for possible impairment of value

Question 20

Goodwill

Answer 20

Goodwill is the portion of the purchase price that exceeds the fair value of identifiable net assets
* Reported only when one company acquires another company
* Net assets = assets acquired less liabilities assumed

Question 21

Goodwill =

Answer 21

Initial purchase - net assets

Question 22

Debt Security

Answer 22

Bond

Balance Sheet:
decrease cash
increase investment

Question 23

For Balance Sheet

Answer 23

Terms with “loss” “gain” go into stockholders equity

Question 24

Equity securities all involve

Answer 24

are all about influence

Question 25

In early 2018, Disney purchased a 40 percent interest in Green Light Pictures for $400,000 in cash, acquiring 40,000 shares of the 100,000 outstanding voting common stock. Following this transaction, the company’s accounting records showed the following changes:

Cash decreased by $400,000.
Investments in Green Light Pictures increased by $400,000.
Given these changes, determine how this transaction impacted Disney’s balance sheet. Assume there were no other changes to Disney’s liabilities or stockholders’ equity at the time of this transaction

Answer 25

Assets = Liabilities + Stockholders Equity

Cash - 400,000
Investments + 400,000

Question 26

In early 2018, Disney purchased a 40 percent interest in Green Light Pictures for $400,000 in
cash (40,000 shares of the 100,000 outstanding voting common stock).
During the fiscal year ending in 2018, Green Light Pictures reported a net income of
$500,000 for the year. The Walt Disney Company’s percentage share of Green Light’s
income is $200,000 (40% × $500,000).

Answer 26

Assets = L+ SE

Investments + 200,000

Investee Earnings +200,000

Question 27

Cash Dividends

Answer 27

+ Cash and - Investments