Chapter 8 Terminology Flashcards
_____ are tangible assets used in a company’s operations that gave a useful life of more than one accounting period.
Plant assets
_____ includes all expenditures necessary to get an asset in place and ready for us.
Cost
Additions to land and have limited useful lives
Land improvements
_______ is the process of allocating the cost of a plant asset to expense white is in use.
Depreciation
An estimate of the assets value at the end of its useful life.
Salvage value.
_______ of a plant asset is the length of time it is used in a company’s operations.
Useful life
_____ is the inability of a plant asset to meet its demands.
Inadequacy
____ is the process of becoming outdated and no longer used.
Obsolescence.
________ charges the same amount to each period of the assets useful life. A two-step process is used.
Straight line-depreciation.
The net balance sheet amount is the ________ and is the assets total cost minus accumulated depreciation.
Asset book value
_______ charges a varying amount for each period depending on assets usage.
Units-of-production depreciation
Units-of-production depreciation formula
Depreciation Expense = Unit Production Rate x Units Produced
________ has more depreciation in the early years and less deprecation in the later years.
Accelerated depreciation method.
The most common accelerated method is the ______, which uses a depreciation rate that is a multiple of the straight-line rate.
Declining-balance method
Double-declining-balance depreciation formula
Double Declining Balance Method Formula = 2 X Cost of the asset X Depreciation rate
Double Declining Balance Formula = 2 X Cost of the asset/Useful Life.
Modified accelerated cost recovery system (MACRS)
Allows straight-line depreciation for some assets but requires accelerated depreciation for most kinds of assets.
Revising an estimate of the useful life or salvage life of a plant asset is called a _________ and only affects current and future financial statements.
Change in an accounting estimate
Revised straight line depreciation formula
Book value - revised salvage value / revised remaining useful life.
Costs that do not materially increase the plant assets life or capabilities.
Revenue expenditures
Costs of plant assets that provide benefits for longer than the current period.
Capital expenditures
______ are expenditures to keep an asset in good operating condition.
Ordinary repairs
Expenditures that make a plant asset more efficient or productive.
Betterments or improvements
Expenditures that extend the assets useful life beyond its original estimate.
Extraordinary repairs
Assets that are physically consumed when used.
Natural resources.
