Chapter 9 Flashcards
A depreciable improvement to land, such as fencing, sprinklers, paving, signs, and lighting
Land Improvement
Recording the acquisition of land, building, or other assets by debiting an asset account
Capitalized
A method of allocating the total
cost (100%) of multiple assets
purchased at one time. Total cost is
divided among the assets according
to their relative fair values.
Relative-fair-value-method
An expenditure that increases the
capacity or efficiency of a plant
asset or extends its useful life.
they are debited to
an asset account.
capital expenditure
Repair work that generates a capital
expenditure because it extends the
asset’s life past the normal expected
life.
Extraordinary repair
An expenditure that does not
increase the capacity or efficiency
of an asset or extend its useful life.
Revenue expenditures are debited
to an expense account.
revenue expenditure
Formula for straight line method of depreciation
Cost - residual value/useful life
An asset is considered ________________ when a newer asset can perform the job more efficiently
obsolete
The cost of a plant asset minus its estimated residual cost
depreciable cost
The expected value of a depreciable asset at the end of its useful life
Residual value
A depreciable asset’s cost minus accumulated depreciation
Book Value
A depreciation method that allocates a varying amount of depreciation each year based on an asset’s usage
Units-of-production method
Formula for Units-of-production method
cost - residual value/useful life units
A depreciation method that expenses more of the asset’s cost near the start of its useful life an less at the end of its useful life
accelerated depreciation method
An accelerated depreciation method that computes annual depreciation by multiplying the depreciable asset’s decreasing book value by a constant percent that is two times the strait-line method
Double-declining-balance method
Formula for double declining balance method
(cost - accumulated depreciation) x 2 x (1/useful life)
A depreciation method that is used for tax purposes
Modified accelerated cost recovery system (MACRS)
What is half-month convention
If an asset is bought before the 15th of a month, it is depreciated for the full month
The process by which businesses
spread the allocation of a natural
resource’s cost over its usage
Depletion
The process by which businesses
spread the allocation of an
intangible asset’s cost over its
useful life.
Amortization
A permanent decline in asset value.
Impairment
An intangible asset that is a federal
government grant conveying an
exclusive 20-year right to produce
and sell a process, product, or
formula.
Patent
An intangible asset that is a federal
government grant conveying an
exclusive 20-year right to produce
and sell a process, product, or
formula.
copyright
An asset that represents distinctive
identifications of a product or
service.
Trademark
Privilege granted by a business
to sell a product or service under
specified conditions.
Franchise
Privilege granted by a government
to use public property in performing
services.
License
Excess of the cost of an acquired
company over the sum of the fair
values of its net assets (assets minus
liabilities
Goodwill
Excess of the cost of an acquired
company over the sum of the fair
values of its net assets (assets minus
liabilities
Asset turnover ratio
