Fundamentals Of Accounting Chapter 10

Front 1

Plant Assets

Back 1

Tangible assets used in a company's operations that have a useful life of more than one accounting period

Front 2

Land improvements

Back 2

Have limited useful lives and are used up. Such as parking lot surfaces, driveways, fences, shrubs and lighting systems

Front 3

Cost

Back 3

Includes all normal and reasonable expenditures necessary to get the asset in leave and ready for its intended use

Front 4

Land

Back 4

Has an indefinite (unlimited) life and I'd not usually used up over time.

Front 5

Building account

Back 5

Charged for the costs of purchasing or constructing a building that is used in operations.

Front 6

Machinery and equipment

Back 6

The costs consist of all costs normal and necessary to purchase them and prepare for their intended use.

Front 7

Lump-Sum purchases

Back 7

Plant Assets purchased as a group in a single transaction

Hint 7

Group, bulk, basket purchase

Front 8

Depreciation

Back 8

The process of allocating the cost is a plant asset to expense in the accounting periods benefiting from its use

Front 9

Factors in Computing Depreciation

Back 9

Cost, salvage value, useful life

Front 10

Salvage Value

Back 10

(Aka residual value or scrap value) is an estimate of the assets value at the end of its benefits period

Front 11

Useful Life

Back 11

Of a plant asset is the length of time it is productively used in a company's operations. Aka service life

Front 12

Inadequacy

Back 12

Refers to the insufficient capacity of s company's plant assets to meet its growing productive demands.

Front 13

Obsolescence

Back 13

Refers to the condition of a plant asset that is no longer useful in producing goods or services with a competitive advantage because of new inventions and improvements.

Front 14

Depreciation Methods

Back 14

Straight-Line, Units-of-Production, Declining-Balance (Double Declining Balance)

Front 15

Straight-Line Method

Back 15

Charges the same amount of expense to each period of the asset's useful life

Front 16

Asset Book Value

Back 16

The net balance sheet amount aka simply book value and equals the total cost minus is accumulated depreciation

Front 17

Straight-Line Depreciation Formula

Back 17

(Cost - salvage value) ÷ useful life in periods

Front 18

Depreciation expense recorded

Back 18

Front 19

Units of Production Method

Back 19

Charges a varying amount to expense for each period of an asset's useful life depending on its usage

Front 20

Units of Production Depreciation Formula

Back 20

Depreciation per unit × Units produced in period

Front 21

Depreciation per unit formula

Back 21

(Cost - Salvage Value) ÷ Total units of Production

Front 22

Declining-Balance Method

Back 22

Yields larger depreciation expense in the early years of an asset's life and less in the later years

Front 23

Straight Line Rate Formula

Back 23

100% ÷ Useful life

100% ÷ 5 years = 20%

Front 24

Double Declining Balance Rate formula

Back 24

2 × Straight line rate

Front 25

Depreciation Expense (ddb)

Back 25

Double Declining Balance Rate x beginning period book value

Front 26

Double Declining Balance table

Back 26

Front 27

Modified Accelerated Cost Recovery System (MACRS)

Back 27

The US Federal income tax law that allows straight line depreciation for some assets but not others

Front 28

Partial Year Depreciation

Back 28

Times Depreciation by fraction

Oct = 3/12

April = 9/12

Front 29

Change in Depreciation Estimate

Back 29

(Book value - revised salvage value) ÷ Revised remaining useful life

Front 30

(Asset) Impairment

Back 30

An exception when there is a permanent decline in the fair value of an asset relative to its book value

Front 31

Revenue expenditures

Back 31

Aka income statement expenditures, are additional costs of plant assetsthat do not materially increase the asset's life or productive capabilities.

Recorded as expenses & deducted from revenues in the current period income statement

Front 32

Capital expendtures

Back 32

Aka balance sheet expenditures, are additional costs of plant assets that provide benefits extending beyond the current period.

They are debited to asset accounts and reported on the balance sheet

Front 33

Ordinary Repairs

Back 33

Expenditures to keep an asset in normal, good operating condition.

Front 34

Betterments

Back 34

Aka improvements, are expenditures that make a plant asset more efficient or productive

Front 35

Extraordinary repairs (Replacements)

Back 35

Are expenditures extending the asset's useful life beyond its original estimate

Capital expenditures because they benefit future expenditures

Front 36

Discarded plant asset

Back 36

A plant asset is discarded when it is no longer useful to the company and has no market value

Front 37

Depletion

Back 37

Is the process of allocating the cosy of a natural resource to the period when it is consumed

Front 38

Natural resources

Back 38

Are assets that are physically consumed when used

Front 39

Ordinary Repairs posting

Back 39

Front 40

Betterments (improvements) posting

Back 40

Front 41

Discarding Plant Assets Posting

Back 41

Front 42

Selling plant assets posting

Back 42

Front 43

Depletion Per Unit Formula

Back 43

(Cost - salvage value) ÷ Total units of capacity

Front 44

Depletion expense posting

Back 44

Depletion expense - mineral deposit

Accum. Depl. Exp. - mineral deposit

Front 45

Intangible assets

Back 45

No physical assets used in operations that confer to their owners longterm rights,privileges, or competitive advantages such as patents, copyrights, licenses, leaseholds, franchises, goodwill, and trademarks.

Front 46

Limited life (intangible asset)

Back 46

Goes through amortization

Front 47

Indefinite life (intangible asset)

Back 47

Should not be amortized

Front 48

Patents

Back 48

Exclusive right granted to its owner to manufacture and sell a patented item or to use a process for 20 years

Front 49

Copyrights

Back 49

Gives its owner the exclusive right to publish and sell musical, literary, or artistic work during the life of the creator plus 70 years

Front 50

Franchises and Licenses

Back 50

Rights that a company or government grants an entity to deliver a product or service under specified conditions

Front 51

Total Asset turnover formula

Back 51

Net sales ÷ average total assets