Chapter 8 Key Terms and Definitions Flashcards
What is amortization?
Process of allocating the cost of an intangible asset to expense over its estimated useful life.
What are betterments?
Expenditures to make a plant asset more effiecient or productive; also called improvements.
What are Capital Expenditures?
Additional costs of plant assets that provide material benefits extending beyond the current period; also called balance sheet expenditures.
What is a copyright?
Right giving the owner the exclusive priviledge to publish and sell musical, literary, or artisitic work during the creator’s life plus 70 years.
What are cost?
All normal and reasonable expenditures necessary to get an asset in place and ready for its intended use.
What is depletion?
Process of allocating the cost of natural resources to periods when they are consumed and sold.
What is depreciation>?
Expense created by allocating the cost of plant and equipment to periods in which they are used; represents the expense of using the asset.
What are Extraordinary Repairs?
Major repairs that extend the useful life of plant asset beyound prior expectations; treated as a capital expenditure.
What is a franchise?
Privileges granted by a company or government to sell a product or service under specified conditions.
What is goodwill?
Amount by which a company’s value exceeds the value of its individual assets less its liabilities.
What is impairment?
Diminishment of an asset value.
What is an inadequacy?
Condition in which the capacity of plant assets is too small to meet the company’s production demands.
What is indefinite life?
Asset life that is not limited by legal, regulatory, contractual, competetive, economic, or other factors.
What are intangible assets?
Long-term assets used to produce or sell products or services; usually lack physical form and have uncertain benefits.
What are land improvements?
Assets that increase the benefits of land, have a limited useful life and are depreciated.
What is a lease?
Contract specifying the rental of property?
What is a leasehold?
Rights the lessor grants to the lessee under the terms of a lease.
What are leasehold improvements?
Alterations or improvements to leased property such as partitions and storefronts.
Who is the lessee?
The party to a lease who secures the right to possess and us the property from another party.
Who is the lessor?
Party to a lease who grants another party the right to possess and use its property.
What is obsolescence?
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.
what are ordinary repairs?
Repairs to keep a plant asset in normal, good operation condition; treated as a revenue expenditure and immediately expensed.
What is a patent?
Exclusive right granted to its owner to produce and sell an item or to use a process for 20 years.
What is the age of a plant asset?
Estimate of the age of a company’s plant assets, computed by dividing accumulated depreciation by depreciation expense.
What are plant assets?
Tangible long lived assets used to produce or sell products and services; also called propert, plant and equipment or fixed assets.
What are revenue expenditures?
Expenditures reported on the current income statements as an expense because they do not provide benefits in future periods.
What is salvage value?
Estimate of amount to be recovered at the end of an assets useful life;also called residual value.
What is straight line depreciation?
Method that allocates an equal portion of the depreciable cost of plant asset to each accounting period in its useful life.
What is total asset turnover?
Measure of a company’s ability to use its assets to generate sale; computed by dividing net sales by average total assets.
