Chapter 8 Flashcards
A higher amount of depreciation is recorded in the early years and a lower amount in the later years.
Accelerated depreciation
The amount that includes all of the cost normally necessary to acquire an asset and prepare it for its intended use.
Acquisition cost
The original cost of an asset minus the amount of accumulated depreciation.
Book value
A cost that improves the asset and is added to the asset account. “Increases the life of the asset or its productivity”
Capital expenditure
Interest on constructed assets is added to the asset account.
Capitalization of interest
A change in the life of the asset or in its residual value.
Change in estimate
The allocation of the original cost of an asset to the periods benefited by its use.
Depreciation
Depreciation is recorded at twice the straight-line rate, but the balance is reduced each period.
Double-declining-balance method
The excess of the selling price over the asset’s book value.
Gain on Sale of Asset
The excess of the purchase price to acquire a business over the value of the individual net assets acquired.
Goodwill
Assets with no physical properties.
Intangible assets
Costs that are related to land but that have a limited life.
Land improvements
The amount by which selling price is less than book value.
Loss on Sale of Asset
Costs incurred in the discovery of new knowledge.
Research and development costs
A cost that keeps an asset in its normal operating condition and is treated as an expense. “Simply maintains an asset in its normal operating condition”
Revenue expenditure
A method by which the same dollar amount of depreciation is recorded in each year of asset use.
Straight-line method
Depreciation is determined as a function of the number of units the asset produces.
Units-of-production method
When land and a building are purchased together as a group for $100,000 cash at a time when the fair market value of the land is $30,000 and for the building is $90,000 what amount will be recorded in the land account?
$25,000
