Chapter 10 Terms Flashcards
Accelerated-Depreciation Method
Depreciation method that produces higher depreciation expense in the early years than in the later years
Additions & Improvements
Costs incurred to increase the operating efficiency, productive capacity, or useful life of a plant asset
Amortization
The allocation of the cost of an intangible asset to expense over its useful life in a systematic and rational manner
Asset Turnover
A measure of how efficiently a company uses its assets to generate sales; calculated as net sales divided by average total assets
Capital Expenditures
Expenditures that increase the company’s investment in productive facilities
Cash Equivalent Price
The fair value of the asset given up or the fair value of the asset received, whichever is more clearly determinable
Copyrights
Exclusive grant from the federal government that allows the owner to reproduce and sell an artistic or published work
Declining-Balance Method
Depreciation method that applies a constant rate to the declining book value of the asset and produces a decreasing annual depreciation expense over the useful life of the asset
Depletion
The allocation of the cost of a natural resource in a rational and systematic manner over the resource’s useful life
Depreciable Cost
The cost of a plant asset less its salvage value
Depreciation
The process of allocating to expense the cost of a a plant asset over its useful (service) life in a rational and systematic manner
Franchise (License)
A contactual arrangement under which the franchisor grants the franchisee the right to sell certain products, perform specific services, or use certain trademarks or trade names, usually in a designated geographic area
Going Concern Assumption
The company will continue in operation for the foreseeable future
Goodwill
The value of all favorable attributes that relate to a company that is not attributable to any other specific asset
Impairment
A permanent decline in the fair value of an asset
Intangible Assets
Rights, privileges, and competitive advantages that result from the ownership of long-lived assets that do not possess physical substance
Materiality Concept
If an item would not make a difference in decision-making, a company does not have to follow GAAP in reporting it
Natural Resources
Assets that consist if standing timber and underground deposits of oil, gas, and minerals
Ordinary Repairs
Expenditures to maintain the operating efficiency and productive life of the long-lived asset
Patent
An exclusive right issued by the U.S. Patent Office that enables the recipient to manufacture, sell, or otherwise control an invention for a period of 20 years from the date of the grant
Plant Assets
Tangible resources that are used in the operations of the business and are not intended for sale to customers
Research & Development (R&D) Costs
Expenditures that may lead to patents, copyrights, new processes, or new products. These costs are expensed as incurred
Revenue Expenditures
Expenditures that are immediately charged against revenues as an expense
Salvage Value
An estimate of an asset’s value at the end of its useful life
Straight-line Method
Depreciation method in which periodic depreciation is the same for each year of the asset’s useful life
Trademark (Trade Name)
A word, phrase, jingle, or symbol that identifies a particular enterprise or product
Units-of-Activity Method
Depreciation method in which useful life is expressed in terms of the total units of production or use expected from an asset
Useful Life
An estimate of the expected productive life, also called service life, of an asset
