Chapter 8 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
Process of allocating the cost of an intangible asset to expense over its estimated useful life.
AMORTIZATION
Asset’s acquisition costs less its accumulated depreciation (or depletion, or amortization); also sometimes used synonymously as the CARRYING VALUE of an account.
ASSET BOOK VALUE
Expenditures to make a plant asset more efficient or productive; also called IMPROVEMENTS.
BETTERMENTS
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 musical, literary, or artistic work during the creator’s life plus 70 years.
COPYRIGHT
All normal and reasonable expenditures necessary to get an asset in place and ready for its intended use.
COST
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
Expense created by allocating the cost of plant and equipment to periods in which they are used; represents the expense of using the asset.
DEPRECIATION
Major repairs that extend the useful life of a plant asset beyond prior expectations; treated as a capital expenditure.
EXTRAORDINARY REPAIRS
Privileges granted by a company or government to sell a product or service under specified conditions.
FRANCHISES or LICENSES
Amount by which a company’s (or a segments’s) value exceeds the value of its individual assets less its liabilities.
GOODWILL
Diminishment of an asset value.
IMPAIRMENT
Condition in which the capacity of plant assets is too small to meet the company’s production demands.
INADEQUACY
Asset life that is not limited by legal, regulatory, contractual, competitive, economic, or other factors.
INDEFINITE LIFE
Long-term assets (resources) used to produce or sell products or services; usually lack p hysical form and have uncertain benefits.
INTANGIBLE ASSETS
Assets that increase the benefits of land, have a limited useful life, and are depreciated.
LAND IMPROVEMENTS
Contract specifying the rental of property.
LEASE
Rights the lessor grants to a lessee under the terms of a lease.
LEASEHOLD
Alterations or improvements to leased property such as partitions and storefronts.
LEASEHOLD IMPROVEMENTS
Party to a lease who secures the right to possess and use the property from another party (the lessor).
LESSEE
Party to a lease who grants another party (the lessee) the right to possess and use its property.
LESSOR
Depreciation system required by federal tax law.
MODIFIED ACCELERATED COST RECOVERY SYSTEMS (MACRS)
Assets physically consumed when used; examples are timber, mineral deposits, and oil and gas fields; also called WASTING ASSETS.
NATURAL RESOURCES
Condition in which, because of new inventions and improvements, a plant asset can no longer be used to produce goods or services with a competitive advantage.
OBSOLESCENCE
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 17 years.
PATENT
An approximation of the age of plant assets, which is estimated by dividing accumulated depreciation by depreciation expense.
PLANT ASSET AGE
Tangible long-lived assets used to produce or sell products and services; also called PROPERTY, PLANT & EQUIPMENT (PP&E), or FIXED ASSETS.
PLANT ASSETS
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
Symbol, name, phrase, or jingle identified with a company, product or service.
TRADEMARK or TRADE (BRAND) NAME
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 or LIMITED LIFE
