accounting chapters 8,

accelerated depreciation method

method that produces larger depreciation charges in the early years of an assets life & smaller charges in its larger years

amortization

process of allocating the cost of an intangible asset to expense over its estimated useful life

asset book value

asset’s acquisition costs less its accumulated depreciation (or depletion, or amortization), also sometimes used synonymously as the carrying value of an account, also called book value

betterments

expenditures to make a plant asset more efficient or productive, also called improvements

capital expenditures

additional costs of plant assets that provide material benefits extending beyond the current period, also called balance sheet expenditures

change in an accounting estimate

changes that results from new information, subsequent developments, or improved judgement that impacts current & future periods

copyright

right giving the owner the exclusive privilege to publish & sell a musical, literary, or artistic work during the creators life plus 70 years

cost

all normal & reasonable expenditures necessary to get an asset & ready for its intended use

declining-balance method

method that determines depreciation charge for the period by multiplying a depreciation rate (often twice the straight line rate) by the assets beginning period book value

depletion

process of allocating the cost of natural resources to periods when they are consumed & sold

depreciable cost

cost of a plant asset less its salvage value

depreciation

expense created by allocating the cost of plant & equipment to periods in which they are used, represents the expense of using the asset

extraordionary repairs

major repairs that extent the useful life of a plant asset beyond prior expectations, treated as a capital expenditure

franchises

privileges granted by a company or government to sell a product or service under specified conditions, also called licenses

goodwill

amount by which a companys (or a segments) value exceeds the value of its individual assets less its liabilities

impairment

permanent diminishment of an assets value

inadequacy

condition in which the capacity of plant assets is too small to meet the companys production demands

indefinite life

asset life is not limited by legal, regulatory, contractual, competitive, economic, or other factors

intangible assets

long-term assets (resources) used to produce or sell products or services, usually lack physical form & have uncertain benefits

land improvements

assets that increase the beneftis of land, have a limited usual life, & are depreciated

lease

contract specifying the rental or property

leasehold

rights the lessor grants to the lessee under the terms of a lease

leasehold improvements

alterations or improvements to leased property such as partitions & storefronts

lessee

party to a lease who secures the right to possess & use the property from another party (the lessor)

lessor

party to a lease who grants another party (the lessee) the right to possess & use its property

licenses

privileges granted by a company or government to sell a product or service under specified conditions; also called franchises

limited life

length of time an asset will be productivity used in the operations of a business, also called service life or usual life

modified accelerated cost recovery system (MACRS)

depreciation system required by federal income tax law

natural resources

assets physically consumed when used, examples are timber, mineral deposits, & oil & gas fields; also called wasting assets

obsolescence

condition in which, because of new inventions & improvements, a plant asset can no longer be used to produce goods or services with a competitive advantage

ordinary repairs

repairs to keep a plant asset in normal, good operating condition, treated as a revenue expenditure & immediately expensed

patent

exclusive right granted to its owner to produce & sell an item or to use a process 20 years

plant assets

trangible long lived assets used to produce or sell products & services, also called property, plant & equipment (PP&E) or fixed assets

research & development costs

research expenditures are those incurred in gaining new knowledge, & development expenditures are the application of knowledge before commerical production or use'; examples of research costs are tests of new vaccines or any other scientific or technical knowledge, & examples of development costs are plans or designs for improved materials, devices, processes, or services

revenue expenditures

expenditures reported on the current income statement as an expense because they do not provide benefits in future periods

salvage value

estimate of amount to be recovered at the end of an assets useful life, also called residual value or scrap value

straight-line depreciation

method that allocates an equal portion of the depreciable costs of plant assets (cost minus salvage) to each accounting period in its useful life

total asset turnover

measure of a companys ability to use its assets to generate sales, computed by dividing net sales by average total assets

trademark or trade (brand) name

symbol, name, phrase, or jingle identified with a company, product, or service

units of production depreciation

method that changes a varying amount to depreciation expense for each period of an assets useful life depending on its usage

useful life

length of time an asset will be productively used in the operations of a business, also called service life or limited life