ACC 201 Test 3 Terms and Formulas

Operating Assets

Long lived assets that are used by the company in the normal course of operations.  ex . property, plant, equipment, intangible assets like patents and copyrights

Goodwill

An intangible asset that represents the extra value of a business beyond the value of its identifiable net assets. It usually comes up when one company purchases another company

Depreciation Expense

A reduction in the value of an asset over its useful life, attempts to allocate the cost of the asset into the income statement over time.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded for an asset since the asset was acquired.

Useful Life

The period of time over which the company anticipates deriving benefit from the use of the asset.

Declining balance depreciation mehtod

Declining balance rate = (m) x straight line rate
Declining Balance Depreciation Expense = Declining Balance Rate × Book Value

Units of Production method

Depreciation Cost/unit= (Cost-residual)/expected usage of asset

Units of production depreciation expense= Depreciation cost/unit x actual usage of asset

Sum of the Years Digits

1. Denominator, N(N+1)/2

2. Depreciation for the year, (year/denom) x value

Revenue Expenditures

Expenditures that do not increase the future economic benefits of the asset.

Capital Expenditures

Expenditures to acquire long-term assets or extend the life, expand the productive capacity, increase the efficiency, or improve the quality of existing long-term assets.