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Chapter 18 Accounting Review
Terms in this set (25)
Plant assets decrease in value because of
use and the passage of time.
The original cost of a plant asset includes the
amount paid the vendor for the plant asset.
Estimated total depreciation expense is calculated as original cost
less estimated salvage value.
Some examples of plant assets are
computers, POS terminals, and display cases.
What concept transfers a portion of a plant asset's cost to an expense in each fiscal period that a plant asset is used to earn revenue?
Matching Expenses with Revenue
The purpose of recording depreciation is to
record an expense in the periods in which the asset is used to earn revenue.
When a plant asset is sold for the asset's book value,
cash received plus accumulated depreciation equals original cost.
When does a business remove a plant asset from use and dispose of it?
When the asset is no longer usable
Book value of a plant asset is original cost
minus accumulated depreciation.
When a plant asset is disposed of, what journal entry is recorded?
Removes the original cost of the plant asset and its related accumulated depreciation
If a plant asset costs $1,200.00, has accumulated depreciation of $1,000.00, and is sold for $200.00, is there a gain or loss?
No gain or loss.
Land and anything attached to the land
All property not classified as real property
Value of an asset determined by tax authorities for the purpose of calculating taxes
Plant Asset Record
Accounting form on which a business records information about each plant asset
Gain on Plant Assets
Revenue results when a plant asset is sold for more than book value
Loss on Plant Assets
Loss that results when a plant asset is sold for less than book value
Declining-Balance Method of Depreciation
Multiplying the book value by a constant depreciation rate at the end of each fiscal period
Original Cost - Estimated Salvage Value = Estimated Total Depreciation Expense
Estimated Total Depreciation Expense / Years of Estimated Useful Life = Annual Depreciation Expense
Straight-Line Depreciation Calculation
Original Cost - Accumulated Depreciation = Ending Book Value
Calculation for Book Value
Annual Depreciation Expense / Months in Year = Monthly Depreciation Expense
Monthly Depreciation Expense X Number of Months Asset is Used = Partial Year's Depreciation Expense
Calculation for Depreciation Expense for Part of a Year
Accumulated Depreciation Debit Decreases
Loss on Plant Assets Debit Increases
Gain on Plant Assets Debit Decreases
Estimated Depreciation Expense / Years of Estimated Useful Life = Straight-Line Rate of Depreciation
Straight-Line Rate of Depreciation X 2 = Double Declining-Balance Rate
Calculation for Depreciation using the Double Declining-Balance Method
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