Questions and Answers
The allocation of the cost of a tangible fixed asset is referred to as _____, whereas the allocation of the cost of an intangible asset is referred to as _____.
The allocation of the cost of a tangible fixed asset is referred to as _____, whereas the allocation of the cost of an intangible asset is referred to as _____.
The allocation of the cost of a tangible fixed asset is referred to as _____, whereas the allocation of the cost of an intangible asset is referred to as _____.
depreciation, amortization
Which statement is true about the straight-line method of depreciation?
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Which of the following is an activity-based depreciation method?
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The partial year depreciation for the double-declining-balance method for Johnson Corp. is?
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The term equivalent to an asset's useful life to a particular company is?
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The depreciation method that allocates an equal amount of the depreciable base to each year of the asset's service life is the _____ method.
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If a company bases depreciation expense on the life of a machine in hours, it is using the _____ method of depreciation.
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When selling a fixed asset, the seller recognizes a gain or loss for the difference between the consideration received and the _____ value of the asset sold.
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The partial year depreciation for Kirby Corp. using the straight-line method is?
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The gain or loss on disposal of an asset is calculated as?
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Group and composite depreciation is commonly used to?
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For natural resources, the depletion base is _____ less any anticipated residual value.
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The allocation of the cost of an intangible asset over its useful life is called _____ .
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What type of provisions might limit the useful life of an intangible asset?
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The purpose of group or composite depreciation is?
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Match the two categories for intangible assets:
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If obsolescence were expected to limit the longevity of a protected product, the useful life of a patent might be _____ its legal life.
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No amortization is recorded for?
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Which items are considered changes in estimates that would be treated on a prospective basis in the current period and future periods?
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The cost of a natural resource less its anticipated residual value is called the _____ _____.
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Which accounting changes must be justified in the notes to the financial statements?
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Amortization is appropriate for intangible assets with?
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Which of the following intangible assets are usually considered to have indefinite lives?
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Study Notes
Depreciation and Amortization
- Depreciation: Allocation of the cost of a tangible fixed asset over its useful life.
- Amortization: Allocation of the cost of an intangible asset over its useful life.
- Depletion: Allocation of the cost associated with natural resources.
Asset Service Life
- The service life or useful life of an asset refers to the expected duration of its economic utility before disposal.
Depreciation Methods
- Straight-Line Method: Allocates equal depreciation expense each year over the asset's service life.
- Units-of-Production Method: Depreciation based on the asset's usage (e.g., machine hours).
Depreciation Calculations
- Partial year depreciation can be calculated differently based on the method used:
- For a $100,000 asset with 5 years of life and no residual value using double-declining-balance method, the partial year depreciation is $10,000.
- Using the straight-line method, the depreciation is $5,000 in the first year for the same asset.
Asset Disposal
- Gain or loss on the disposal of an asset is determined by comparing the consideration received with the asset's book value.
- Calculation for gain/loss: consideration received - book value of the asset sold.
Group and Composite Depreciation
- Commonly employed to reduce record-keeping costs for multiple similar assets.
Natural Resources and Depletion
- Depletion Base: Calculated as the cost of a natural resource minus any anticipated residual value.
Intangible Assets
- Categorized into:
- Intangibles with indefinite lives (e.g., trademarks) which do not require amortization.
- Intangibles with finite lives, which do require amortization.
Restrictions on Intangible Assets
- Useful life of intangible assets may be limited by legal, regulatory, or contractual provisions.
Changes in Estimates
- Changes that affect estimates, such as increased residual values or changes in useful life, should be applied prospectively in the current and future periods.
Accounting Changes Disclosure
- Changes in depreciation methods must be justified in the financial statements' notes.
Amortization Conditions
- Amortization is applicable only for intangible assets with finite useful lives.
Studying That Suits You
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Description
Test your knowledge with these flashcards from Chapter 11 of your accounting course. Focus on the key concepts of depreciation, amortization, and depletion of fixed and intangible assets. Perfect for reinforcing your understanding of asset cost allocation.
