Define the historical cost principle (introduced in chapter 1).

List and describe the three characteristics of plant assets.

What does the cost of a plant asset consist of?

Describe what the cost of a fixed asset consists of.

What does the cost of land include? How should these costs be recorded?

How does the cost of a land improvement differ from that of a cost of a building?

What cost items are included in the cost of equipment?

Why are recurring costs treated as expenses rather than being capitalized?

What is the purpose of cost allocation of fixed asses?

Explain the difference between book value and fair value.

Is land a depreciable asset? Why or why not?

What are the three factors in computing depreciation?

What is an adjusting entry (chapter 3)? Why is such an entry necessary for depreciation?

Depreciation is generally computed using one of three methods. What are those three methods?

What does the account named accumulated depreciation represent?

Define the term depreciable cost.

How is the depreciation expense measured in the straight-line method?

Show the formula for the straight-line method.

Review illustration 9-10. Compare and contrast annual depreciation expense, accumulated depreciation, and book value. Express your insights comparing these across time.

List the steps necessary to calculate depreciation expense using Units-of-activity method.

How does calculating depreciation expense using the declining-balance method differ from the straight-line depreciation method?

How is gain on sale of a plant asset calculated? Which statement does the gain appear on?

How is loss on sale of a plant asset determined? Which statement does the loss appear on?

What does it mean to retire a fixed asset?

What is an intangible asset. List and explain the types presented in this chapter.

In your own words explain the meaning of Goodwill.

Why are research and development costs expensed as incurred?