Chapter 10 Flashcards
Method that produces larger depreciation charges in the early years of an asset’s life and smaller charges in its later years.
Accelerated depreciation method
Expenditures to make a plant asset more efficient or productive; also called improvements.
Betterments
Asset’s acquisition costs less its accumulated depreciation (or depletion, or amortization); also sometimes used synonymously as the carrying value of an account.
Book value
Additional costs of plant assets that provide material benefits extending beyond the current period; also called balance sheet expenditures.
Capital expenditures
Change in an accounting estimate that results from new information, subsequent developments, or improved judgment that impacts current and future periods.
Change in an accounting estimate
Right giving the owner the exclusive privilege to publish and sell a musical, literary, or artistic work during the creator’s life plus 70 years.
Copyright
Method that determines depreciation charge for the period by multiplying a depreciation rate (often twice the straight-line rate) by the asset’s beginning-period book value.
Declining-balance method
Process of allocating the cost of natural resources to periods when they are consumed and sold.
Depletion
Major repairs that extend the useful life of a plant asset beyond prior expectations; treated as a capital expenditure.
Extraordinary repairs
Amount by which a company’s (or a segment’s) value exceeds the value of its individual assets less its liabilities.
Goodwill
Long-term assets (resources) used to produce or sell products or services; usually lack physical form and have uncertain benefits.
Intangible assets
Rights the lessor grants to the lessee under the terms of a lease.
Leasehold
Assets physically consumed when used; examples are timber, mineral deposits, and oil and gas fields; also called wasting assets.
Natural resources
Repairs to keep a plant asset in normal, good operating condition; treated as a revenue expenditure and immediately expensed.
Ordinary repairs
Exclusive right granted to its owner to produce and sell an item or to use a process for 20 years.
Patent
Expenditures reported on the current income statement as an expense because they do not provide benefits in future periods.
Revenue expenditures
Estimate of amount to be recovered at the end of an asset’s useful life; also called residual value or scrap value.
Salvage value
Method that allocates an equal portion of the depreciable cost of plant asset (cost minus salvage) to each accounting period in its useful life.
Straight-line depreciation
Measure of a company’s ability to use its assets to generate sales; computed by dividing net sales by average total assets.
Total asset turnover
Method that charges a varying amount to depreciation expense for each period of an asset’s useful life depending on its usage.
Units-of-production depreciation
Length of time an asset will be productively used in the operations of a business; also called service life or limited life.
Useful life
