ACCT 2010 Chapter 9 Test Questions and Correct Answers
Long-lived assets -Resources owned by a business that enable it to produce the goods or services that are sold to customers -Will not be used up within the next year -Divided into tangible and intangible Tangible assets -AKA fixed assets -Long-lived assets that have physical substance -Ex. Land, buildings, machinery, vehicles, office equipment, and furniture -Are depreciated Intangible assets -Long-lived assets which have special rights but not physical substance -Acquired for operational use -Ex. Brand names, trademarks, goodwill, and licensing rights -Are amortized What long-lived assets will not be depreciated/amortized? -Land -Goodwill -Trademarks Stages in an asset's life 1. Acquired (record at cost on B/S) 2. Used (depreciate/amortize, capitalize/expense repairs and maintenance) 3. Disposed (remove from B/S, calculate and record gain/loss) What does the acquisition cost include? 1. Purchase price 2. All expenditures needed to prepare the asset for its intended use Capitalize to record a cost as an asset, rather than an expense Land costs that should be capitalized when acquired -Purchase cost -Legal fees -Survey fees -Title search fees Building costs that should be capitalized when acquired -Purchase/construction cost -Legal fees -Appraisal fees -Architect fees
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