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Accounting Final Exam
N/A
21
Accounting
Undergraduate 1
05/03/2014

Additional Accounting Flashcards

 


 

Cards

Term
Tangible assets, def and examples
Definition
Have a physical presence, they can be seen and touched. Include equipment, machinery, natural resources, and land
Term
Intangible, def and examples
Definition
Have no physical form. rights or privileges. Include patents, copyrights,
Term
How do we account for decreases in value of property, plant and equipment?
Definition
Depreciation
Term
How do we account for decreases in value of Natural resources?
Definition
Depletion
Term
How do we account for decreases in value of Land?
Definition
Land doesn't lose value
Term
How do we account for decreases in value of intangible assets with identifiable useful lives?
Definition
Amortization, using shorter of legal life or useful life
Term
How do we account for decreases in value of intangible assets with unidentifiable useful lives?
Definition
No loss in value unless value impaired somehow, usually have indefinite value
Term
Historical cost concept
Definition
Cost of asset = amount paid for it + transport and costs necessary to get asset up and functioning
Term
Basket purchase allocation
Definition
When assets are purchased in a group their relative costs are calculated by their relative fair market value

Ex. $240,000 purchase
Values $270,000 building, $90,000 land

Costs: 180000 building, 60,000 land
Term
Straight line depreciation
Definition
Costs-salvage value/useful life
Costs recognized annually
Term
Double declining balance depreciation
Definition
Straight line rate = 1/useful life
Double declining balance rate = 2(straight line rate)
Depreciation expense = double declining balance rate * book value of asset at beginning of period
Book value = (Historical Cost - accumulated depreciation) -cannot fall below salvage value
Term
Units of productions depreciation
Definition
(Cost - salvage value)/total estimated units of production * units of production in current year = annual depreciation expense
Term
Costs that are expensed
Definition
Costs to keep asset in working order (routine maintenance, minor repairs)
Term
Costs that are capitalized
Definition
Substantial amounts spent to extend asset life or improve quality (ie essentially new asset, for example a new engine, etc)

If improve quality: accounted for by higher depreciation costs over remaining life of asset

If extend life: Cost added to book value and life extended accordingly
Term
Depleting natural resources
Definition
Costs per unit = Cost to buy/number units of natural resource

Expense for depletion = units used * cost per unit
Term
Amortizing intangible assets
Definition
Trademarks: Virtually infinite life so not expensed annually unless costs to defend incurred

Patents: Expensed over life of patent

Copyrights: Indefinite length for not expensed annually

Franchises: Expensed over life (estimated)

Goodwill: Difference in purchase price and value of asset, value of business reputation,
Term
Contingent Liability Def
Definition
Potential obligation arising from past event - examples: Pending lawsuit, warranties, sick pay, etc
Term
Accounting for Contingent Liability
Definition
If likely to be recognized (incurred) and can be reasonably estimated: Must be included in financial statements at liability on balance sheet

If reasonably possible or likely but cannot be reasonably estimated, included at footnote in financial statements

If likelihood is remote, not liability must be recognized or included in footnotes
Term
Accounting for warranty obligations
Definition
Liability that must be reported, booked as estimated liability and expense, as warranties incurred, warranties payable reduced and cash reduced
Term
Accounting for notes payable
Definition
Book cash and note payable liability when issued, book interest annually until end of liability term and book principle repayment at end of term
Term
Accounting for Sales Tax
Definition
Sales tax payable booked, cash booked, until payed to state/government
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