Accounting for Long-Term Assets and Depreciation Methods

Plant Assets

Tangible assets used in operations, not for resale.

Land

Non-depreciable asset; includes various acquisition costs.

Buildings

Depreciable structures; includes purchase and construction costs.

Machinery and Equipment

Depreciable assets; includes purchase and installation costs.

Land Improvements

Enhancements like parking lots; depreciate over useful life.

Lump-Sum Asset Purchase

Combined purchase cost allocated based on market values.

Depreciation

Allocation of asset cost over its useful life.

Straight-Line Method

Equal depreciation expense each period over useful life.

Units-of-Production Method

Depreciation based on asset usage or output.

Double-Declining-Balance Method

Accelerated depreciation method; higher expense in early years.

Salvage Value

Estimated value of an asset at the end of its life.

Useful Life

Period over which an asset is expected to be used.

Depreciation Expense

Cost allocated to an asset for a specific period.

Depreciation Per Unit

Cost minus salvage value divided by total production.

Market-Basket Purchase

Allocation of cost based on relative market values.

Transportation Charges

Costs incurred to transport assets to their location.

Installation Costs

Expenses related to setting up an asset for use.

Insurance During Transit

Coverage for assets while being transported.

Brokerage Fees

Costs associated with purchasing assets through brokers.

Title Insurance Premiums

Insurance protecting against defects in property title.

Tax Costs

Expenses related to property taxes during acquisition.

Depreciation Rate

Percentage used to calculate annual depreciation expense.

Depreciation Expense for Period

Calculated as cost minus salvage value over useful life.

Partial-Year Depreciation

Depreciation calculated for asset ownership fraction.

Change in Estimates

Revised useful life impacts depreciation calculations.

Straight-Line Method

Depreciation method allocating equal expense yearly.

Revenue Expenditures

Costs benefiting current period, like repairs.

Capital Expenditures

Costs improving asset or extending life.

Ordinary Maintenance

Routine costs recorded as expense increases.

Asset Improvements

Enhancements recorded as increases to asset value.

Extraordinary Repairs

Major repairs extending asset life, capitalized.

Accumulated Depreciation

Total depreciation expense recorded against asset.

Disposal of Plant Assets

Process of removing assets from financial records.

Gain on Disposal

Profit from selling asset above book value.

Loss on Disposal

Loss incurred when selling asset below book value.

Annual Depreciation

Yearly depreciation expense calculated on asset.

Depreciation to Date of Disposal

Total depreciation calculated until asset sale date.

Cash Received

Amount received from selling an asset.

Asset Cost

Original purchase price of the asset.

Natural Resources

Assets extracted from nature, subject to depletion.

Depletion Expense

Expense charged for using natural resources.

Book Value

Asset's value after accounting for depreciation.

Salvage Value

Estimated residual value at asset's end of life.

Useful Life

Expected duration an asset will be functional.

Journal Entry

Record of financial transactions in accounting.

Depletion

Reduction in value of natural resources over time.

Depletion Per Unit

Cost minus salvage value divided by total units.

Depletion Expense

Cost of extracted resources recorded as an expense.

Units-of-Production Method

Calculates depletion based on actual resource extraction.

Intangible Assets

Nonphysical assets providing exclusive rights or privileges.

Patents

Exclusive rights to produce goods for 20 years.

Copyrights

Rights to publish works for creator's life plus 70 years.

Trademarks

Symbols or names identifying a company's products.

Goodwill

Intangible asset from favorable business factors.

Fixed Asset Turnover

Sales generated per dollar of fixed assets.

Salvage Value

Estimated residual value of an asset at end.

Acquisition Cost

Total cost incurred to acquire an asset.

Legal Fees

Costs associated with legal processes for asset acquisition.

Filing Fees

Costs for registering intangible assets legally.

Useful Life

Estimated duration an asset can generate economic benefits.

Amortization

Gradual write-off of intangible asset costs over time.

Impairment

Reduction in the recoverable amount of an asset.

Exclusive Rights

Legal privileges granted to use or sell an asset.

Operational Use

Utilization of assets in business activities.

Renewal of Trademarks

Trademarks can be renewed every 10 years.

Acquired Goodwill

Goodwill recognized only through business acquisition.

Current Cash Equivalent Cost

Cost recorded at present value for asset acquisition.

Average Book Value

Average value of fixed assets over a period.