Long-Term Operational Assets and Depreciation Methods

Long-Term Assets

Assets used for two or more accounting periods.

Current Assets

Assets used within a single accounting period.

Tangible Assets

Physical assets that can be seen and touched.

Intangible Assets

Non-physical assets representing rights or privileges.

Depreciation

Expense recognition for tangible asset wear and tear.

Depletion

Expense recognition for natural resource usage.

Amortization

Expense recognition for intangible asset usage.

Historical Cost Concept

Assets recorded at purchase price plus related costs.

Basket Purchase

Acquisition of multiple assets in one transaction.

Relative Fair Market Value Method

Allocates basket purchase price based on asset values.

Depreciable Cost

Original cost minus salvage value of an asset.

Salvage Value

Expected market value of a fully depreciated asset.

Straight-Line Method

Equal depreciation expense each accounting period.

Double-Declining-Balance Method

Accelerated depreciation, higher in early years.

Units-of-Production Method

Depreciation varies based on asset usage.

Book Value

Asset value after deducting accumulated depreciation.

Accumulated Depreciation

Contra asset account showing total depreciation taken.

Goodwill

Value from favorable business factors like reputation.

Plant Assets

Tangible long-term assets used in operations.

Natural Resources

Assets like minerals and timber with depletion expense.

Identifiable Useful Lives

Intangibles with a defined period of benefit.

Indefinite Useful Lives

Intangibles with no foreseeable expiration.

Asset Life Cycle

Stages from acquisition to retirement of assets.

Depreciation Expense

Cost allocated to expense for asset usage.

Cost per Unit of Production

Depreciable cost divided by total production units.

Fair Market Value

Estimated price for an asset in the market.

Asset Retirement

Process of disposing or retiring an asset.

Common Stock Issuance

Funding method through selling ownership shares.