Chapter 8 - Long-Term Assets and Depreciation

These flashcards cover key concepts, terms, and definitions related to long-term assets and depreciation as discussed in the lecture.

Long-Term Assets

Assets that provide benefit to a company for longer than one year.

Intangible Assets

Resources that benefit a business's operation but lack physical substance.

Depreciation

Reduction in the value of a fixed asset over its useful life.

Acquisition Cost

Total cost of getting a fixed asset ready for its intended use.

Accumulated Depreciation

Contra-asset account that accumulates total depreciation expense from asset acquisition.

Net Book Value

Acquisition cost minus accumulated depreciation at a point in time.

Salvage Value

Estimated amount recovered from selling an asset at the end of its estimated useful life.

Useful Life

Expected service life of an asset.

Straight-Line Method

A method of calculating depreciation where an equal amount is allocated to each period of an asset's useful life.

Capital Expenditures (CapEx)

Expenditures that improve, extend the life, or increase the value of long-term assets.

Revenue Expenditures

Expenses for normal maintenance and repairs on fixed assets.

Return on Assets (ROA) Ratio

A measure of a firm's financial health, calculated as net income divided by average total assets.

Asset Turnover Ratio

Evaluates a company’s effective use of its assets, calculated as net sales divided by average total assets.