Chapter 9

Question 1

purchase costs

Answer 1

purchase price, closing costs,and real estate brokers commission

remodeling and replacing or repairing the roof, floors, electrical wiring and plumbing

Question 2

construction costs

Answer 2

contract price plus payments for architects fees, building permits and excavation costs

Question 3

Depreciation

Answer 3

process of allocating to expense the cost of a plant asset over its useful life in a rational and systematic manner

• process of cost allocation, not asset valuation
• applies to land improvements, buildings and equipment, not land
• depreciable, because the revenue-producing ability of asset will decline over the asset useful life

Question 4

salvage value

Answer 4

estimate of the asset’s value at the end of its useful life

Question 5

record depreciation up to the date of disposal

Answer 5

eliminate asset by

1. debiting accumulated depreciation
2. crediting the asset account