1. Define the following terms:

Depreciable Cost:

Book Value:

Depreciation:

Residual Value:

2. List three methods of depreciation and the basic formula to calculate corresponding "amount in the journal entry.

a.

b.

c.

3. Which one of the three methods in #6 above does not subtract the Residual Value (also called Salvage Value) in the formula to calculate the amount of expense?

4. What is the difference between Revenue Expenditure and Capital Expenditure?

5. How is a change in estimate in the life or residual (also known as salvage) value handled?

• NOTE: Maintenance and repairs for fixed assets in service are revenue expenditures. Costs that make the asset better or make it last longer are capital expenditures. Exhibit 11 summarizes revenue and capital expenditures.
• NOTE: Accounting is concerned only with allocating the cost of an asset to the period in which it is used. Accountants do not attempt to track the market value of an asset.

OBJECTIVE 4 TOPIC: Accounting for natural resources, including the journal entry for depletion.

1. What are some examples of natural assets (resources).

2. Define Depletion Expense:

3. What are the two calculating steps to calculate depletion expense amount?

a)

b)

4. What is the adjusting entry at the end of the period to record depletion expense? Include the name of accounts and whether the accounts are Dr. or Cr. in the journal entry.