Chapter 8 Terms Flashcards
Plant Assets
Tangible assets used in a company’s operations that have a useful life for more than one accounting period
Cost
All expenditures necessary to get an asset in place and ready for use. Must be normal, reasonable, and necessary.
Buildings
includes cost to build or obtain
Land
cost needed to prepared for intended use
Land Improvements
Additions to land (sidewalks, parking lots, lights)
Lump-sum Purchases
a group of assets purchased in one transaction
Salvage Value
Asset’s value at the end of its useful life
Useful Life
Length of time an asset is used in a company’s operation. (Can be different than productive life)
Inadequacy
Inability for an asset to meet its demands
Obsolescence
The process of becoming out-dated
Straight-line Depreciation
Charges same amount every year
Units-of-Productions Method
Varies depending on asset’s usage
Declining-Balance Method
More depreciation in early years and less in the later years
Revenue Expenditures
Do NOT increase an asset’s useful life or capabilities (ordinary repairs)
Capital Expenditures
Benefits an asset longer than the current period (betterment - more efficient) or (extraordinary repairs - increases life-span)
