Financial Accounting for Managers - Long-Term Assets

These flashcards cover key concepts related to long-term assets in financial accounting, including definitions and classifications essential for understanding asset management.

Long-Term Assets

Assets that are expected to provide economic benefits for a period longer than one year, classified into tangible and intangible assets.

Tangible Assets

Physical assets such as land, buildings, equipment, and natural resources.

Intangible Assets

Non-physical assets that represent exclusive rights providing benefits to owners, including patents, trademarks, and goodwill.

Asset Acquisition

The process of obtaining property, plant, and equipment, recorded at the original cost of the asset plus necessary expenditures to prepare for use.

Land Improvements

Expenditures to enhance land, such as parking lots and landscaping, which have limited useful lives and are recorded separately from land.

Basket Purchases

Acquiring multiple assets in a single purchase, requiring allocation of the total cost based on the relative fair values of each asset.

Natural Resources

Assets like oil and timber that are consumed over time and recorded at cost plus necessary expenditures to prepare them for use.

Amortization

The process of allocating the cost of intangible assets to expense over their useful life.

Depreciation

The systematic reduction of the recorded cost of a fixed asset, excluding land, over its useful life.

Goodwill

The excess of the purchase price over the fair value of identifiable net assets acquired in a business combination.

Impairment

A reduction in the carrying amount of an asset when its book value exceeds its fair value.

Expenditures After Acquisition

Costs incurred after obtaining a long-term asset, distinguished as either expenses or capitalized based on future benefits.

Straight-Line Depreciation

A method of depreciation where an equal amount of depreciation expense is recognized each year.

Double-Declining Balance Depreciation

An accelerated depreciation method that doubles the straight-line rate and applies it to the book value.

Activity-Based Depreciation

Depreciation calculated based on the actual usage of the asset, typically expressed in terms of units produced or hours used.

Franchises

Licenses granted to operate a business under a franchisor's name and system, recorded as intangible assets.

Patents

Exclusive rights granted to inventors to manufacture or use their inventions for a period of 20 years.

Trademarks

Distinctive symbols or logos used to identify and distinguish products or services from competitors.

Loss on Sale

A decrease in the value of an asset when sold below its book value, recorded as a loss in financial statements.

Reservice Life

The estimated duration an asset is expected to remain useful before it must be replaced or disposed of.