ACC 201 ch 7
Card Set Information
ACC 201 ch 7
Long Term Assets
Accelerated depreciation method p. 334
Allocates a higher depreciation in the earlier years of the asset's life and lower depreciation in later years.
Accumulated Depreciation . p. 330
A contra asset account representing the total depreciation taken to date
Activity-based method p. 335
Allocates an asset's cost based on its use.
Addition p. 328
Occurs when a new major component is added to an existing asset.
Amortization p. 339
Allocation of the cost of an intangible asset over its service life.
Asset turnover p. 345
Net sales divided by average total assets, which measures the sales per dollar of assets invested.
Basket purchase p. 323
Purchase of more than one asset at the same time for one purchase price.
Big bath p. 348
Recording all losses in one year to make a bad year even worse.
Book value p. 331
Equal to the original cost of the asset minus the current balance in Accumulated Depreciation.
Capitalize p. 321
Record an expenditure as an asset.
Capitalized interest p. 322
Interest costs recorded as assets rather than interest expense.
Copyright p. 326
An exclusive right of protection given to the creator of a published work such as a song, film, painting, photograph, book, or computer software.
Declining-balance method p. 334
An accelerated depreciation method that records more depreciation in earlier years and less depreciation in later years.
Depletion p. 337
Allocation of the cost of a natural resource over its service life.
Depreciation p. 330
Allocation of the cost of a tangible asset over its service life.
Franchise p. 326
Local outlets that pay for the exclusive right to use the franchisor company's name and to sell its products within a specified geographical area.
Goodwill p. 327
The value of a company as a whole, over and above the value of its identifiable net assets. Goodwill equals the purchase price less the fair value of the net assets acquired.
Impairment p. 346
Occurs when the future cash flows (future benefits) generated for a long-term asset fall below its book value (cost minus accumulated depreciation).
Improvement p. 328
The cost of replacing a major component of an asset.
Intangible assets p. 324
Long-term assets that lack physical substance, and whose existence is often based on a legal contract.
Land improvements p. 322
Improvements to land such as paving, lighting, and landscaping that, unlike land itself, are subject to depreciation.
Material p. 329
Large enough to influence a decision.
Natural resources p. 324
Assets like oil, natural gas, and timber that we can physically use up or deplete.
Patent p. 325
An exclusive right to manufacture a product or to use a process.
Profit margin p. 345
Net income divided by net sales; indicates the earnings per dollar of sales.
Repairs and maintenance p. 328
Expenses that maintain a given level of benefits in the period incurred.
Residual value p. 331
The amount the company expects to receive from selling the asset at the end of its service life; also referred to as salvage value.
Return on assets p. 344
Net income divided by average total assets; measures the amount of net income generated for each dollar invested in assets.
Service life p. 331
How long the company expects to receive benefits from the asset before disposing of it; also referred to as useful life.
Straight-line method p. 332
Allocates an equal amount of depreciation to each year of the asset's service life.
Trademark p. 326
A word, slogan, or symbol that distinctively identifies a company, product, or service.