Chapter 9 Flashcards
Depreciation method that expenses more of the asset’s cost near the start of its useful life and less at the end of its useful life
Accelerated Depreciation Method
Process where a business spread the allocation of an intangible asset’s cost over its useful life
Amortization
Measures how efficiently a business uses its average total assets to generate sales. Net Sales/Average Total Assets
Asset Turnover Ratio
Depreciable asset’s cost minus accumulated depreciation
Book Value
Expenditure that increases the capacity or efficiency of a plant asset or extends useful life. Debited to an asset account
Capital Expenditure
Recording the acquisition of land, building, or other assets by debiting an asset account
Capitalize
Characteristic of a transition that causes a change in future cash flows
Commercial Substance
Exclusive right to reproduce and sell something of intellectual property
Copyright
Principle that states that acquired assets and services should be recorded at their actual cost
Cost Principle
Process where a business spreads the allocation of a natural resource’s cost over its usage
Depletion
Cost of a plant asset minus its estimated residual value
Depreciable Cost
Process where a business spreads the allocation of a plant’s asset’s cost over its useful life
Depreciation
Accelerated depreciation method that compute annual depreciation by multiplying the depreciable asset’s decreasing book value by a constant percent that is two times the straight-line depreciation rate
Double-Declining-Balance Method
Repair work that generates a capital expenditure because it extends the asset’s life past the normal expected life
Extraordinary Repair
Privilege granted by a business to sell a product or service under specified conditions
Franchise
Excess of the cost of an acquired company over the sum of the market values of its net assets (assets-liabilities)
Goodwill
Permanent decline in asset value
Impairment
Asset with no physical form that is valuable because of the special rights it carries
Intangible Asset
A depreciable improvement to land
Land Improvment
Privilege granted by a government to use public property in performing services
License
Depreciation method that is used for tax purposes
Modified Accelerated Cost Recovery System (MACRS)
An asset that comes from the earth and is consumed
Natural Resource
When a newer asset can perform the job more efficiently that the old asset
Obsolete
Intangible asset that is a Federal Government grant giving an exclusive right over a specific product or formula for 20 years
Patent
Long-lived tangible asset that is used in the operation of a business
Plant Asset
Method of allocating the total cost of multiple assets purchased at one time. Total cost divided among assets based on relative market values
Relative-Market-Value Method
Expected values of a depreciable asset at the end of its useful life
Residual Value
Expenditure that does not increase the capacity or efficiency of an asset or extend its useful life
Revenue Expenditure
Depreciation method that allocates an equal amount of depreciation each year. (Cost-Residual Value)/Useful Life
Straight-Line Method
Asset that represents distinctive identifications of a product or service
Trademark
Depreciation method that allocates a varying amount of depreciation each year based on an asset’s usage
Units-of-Production Method
Length of the service period expected from an asset
Useful Life
