Chapter 10 - Plant Assets, Natural Resources, and Intangible Assets

Accelerated-Depreciation Method

A method that results in higher depreciation expense in the initial years compared to later years.

Additions and Improvements

Costs aimed at enhancing the operating efficiency, capacity, or longevity of a plant asset.

Amortization

The systematic allocation of the cost of an intangible asset over its useful life.

Asset Turnover

A ratio showing how efficiently a company uses its assets to generate sales, calculated by dividing net sales by average total assets.

Capital Expenditures

Investments that increase a company’s capacity in productive facilities.

Copyrights

Exclusive federal rights granted to reproduce and sell a creative or published work.

Declining-Balance Method

A depreciation method applying a constant rate to the declining book value of an asset, resulting in decreasing annual depreciation.

Depletion

The systematic allocation of the cost of a natural resource over its useful life.

Depreciation

The allocation of a plant asset’s cost to expense over its useful life.

Franchise (License)

A contractual agreement where one party grants another the right to sell products, perform services, or use trademarks within a specific area.

Going Concern Assumption

The assumption that a company will continue its operations into the foreseeable future.

Goodwill

The favorable attributes of a company that cannot be directly tied to any specific asset.

Impairment

A lasting decrease in the fair value of an asset.

Intangible Assets

Non-physical assets that provide rights, privileges, and competitive advantages.

Materiality Concept

States that if an item does not impact decision-making, a company may not need to follow GAAP in reporting it.

Natural Resources

Assets such as standing timber and deposits of oil, gas, and minerals.

Ordinary Repairs

Costs incurred to maintain the operational efficiency and lifespan of a unit.

Patent

A right granted to control an invention, allowing the holder to manufacture, sell, or otherwise utilize it for 20 years.

Plant Assets

Physical resources used in business operations and not intended for resale.

Research and Development (R&D) Costs

Expenses that may contribute to the creation of new patents, copyrights, processes, or products.

Revenue Expenditures

Costs that are charged directly against revenues as expenses.

Salvage Value

An estimate of an asset’s value at the end of its useful life.

Straight-Line Method

A depreciation method where the annual depreciation is consistent across the asset’s useful life.

Trademark (Trade Name)

A word, phrase, jingle, or symbol that distinguishes a specific company or product.

Units-of-Activity Method

A depreciation method where useful life is based on the total units of production or usage expected from an asset.

Useful Life

The anticipated productive lifespan of an asset, also known as service life.