Accounting Exam 3
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34 Terms
Time Value of Money
Measurement and recording of liabilities based on the concept of…
formula for simple interest
P*R*T
forumla for future value
present value*fv factor
compounding
the frequency with which interest is added to the principal
discounting
How much a future amount is worth today
lump sum
single one time payment
annuity
series of equal payments, with each payment having the same time interval between them
annuity due
payments occurring at the beginning of each period
capitalized cost
recorded as part of an asset on the balance sheet, rather than as an expense in an income statement
recurring
ongoing cost of repair of an asset in use
capital expenditures
cost incurred to increase the operating efficiency of the asset, productive capacity, or useful life
capitalized
capital expenditure is added to the cost of an asset that has been improved
revenue expenditures
expenditures made to keep an asset in good working order
depreciation
systematic allocation of the cost of a plant asset to expense over its useful life
cost of an asset formula
accumulated depreciation= book value
useful life
estimate of the length of time in yrs the asset will be used in business operations
residual value
estimate of what the company thinks the asset can be sold for the end of its useful life
straight line depreciation
cost-residual/life(in yrs)
Accumulated depreciation method
(cost-residual value)*(life/syd)
double declining balance depreciation formula
book value/(2/life)
you can not depreciate past…?
the residual value
amortization table
used to spread loan payment and principal reduction
lease
a contract that specifies the terms under which the owner of an asset argues to transfer the right to use an asset to another party
lesse
the party that is granted the right to use property
lessor
the owner of property that is leased to another property
lesse accounting
records a leased asset and a lease liability on their balance sheet equal to present value of lease payments