Chapter 10 - Plant Assets, Natural Resources, and Intangible Assets

Term: Accelerated-Depreciation Method

Definition: A method that results in higher depreciation expense in the initial years compared to later years.

Term: Additions and Improvements

Definition: Costs aimed at enhancing the operating efficiency, capacity, or longevity of a plant asset.

Term: Amortization

Definition: The systematic allocation of the cost of an intangible asset over its useful life.

Term: Asset Turnover

Definition: A ratio showing how efficiently a company uses its assets to generate sales, calculated by dividing net sales by average total assets.

Term: Capital Expenditures

Definition: Investments that increase a company’s capacity in productive facilities.

Term: Copyrights

Definition: Exclusive federal rights granted to reproduce and sell a creative or published work.

Term: Declining-Balance Method

Definition: A depreciation method applying a constant rate to the declining book value of an asset, resulting in decreasing annual depreciation.

Term: Depletion

Definition: The systematic allocation of the cost of a natural resource over its useful life.

Term: Depreciation

Definition: The allocation of a plant asset’s cost to expense over its useful life.

Term: Franchise (License)

Definition: A contractual agreement where one party grants another the right to sell products, perform services, or use trademarks within a specific area.

Term: Going Concern Assumption

Definition: The assumption that a company will continue its operations into the foreseeable future.

Term: Goodwill

Definition: The favorable attributes of a company that cannot be directly tied to any specific asset.

Term: Impairment

Definition: A lasting decrease in the fair value of an asset.

Term: Intangible Assets

Definition: Non-physical assets that provide rights, privileges, and competitive advantages.

Term: Materiality Concept

Definition: States that if an item does not impact decision-making, a company may not need to follow GAAP in reporting it.

Term: Natural Resources

Definition: Assets such as standing timber and deposits of oil, gas, and minerals.

Term: Ordinary Repairs

Definition: Costs incurred to maintain the operational efficiency and lifespan of a unit.

Term: Patent

Definition: A right granted to control an invention, allowing the holder to manufacture, sell, or otherwise utilize it for 20 years.

Term: Plant Assets

Definition: Physical resources used in business operations and not intended for resale.

Term: Research and Development (R&D) Costs

Definition: Expenses that may contribute to the creation of new patents, copyrights, processes, or products.

Term: Revenue Expenditures

Definition: Costs that are charged directly against revenues as expenses.

Term: Salvage Value

Definition: An estimate of an asset’s value at the end of its useful life.

Term: Straight-Line Method

Definition: A depreciation method where the annual depreciation is consistent across the asset’s useful life.

Term: Trademark (Trade Name)

Definition: A word, phrase, jingle, or symbol that distinguishes a specific company or product.

Term: Units-of-Activity Method

Definition: A depreciation method where useful life is based on the total units of production or usage expected from an asset.

Term: Useful Life

Definition: The anticipated productive lifespan of an asset, also known as service life.