Intermediate Accounting Final

15 terms by kmerry 

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Ordinary & necessary costs

those that will be capitalized as the cost of an asset

revenue expenditure

another term for an expense

capital expenditure

another term for an asset

commercial substance

when assets in an exchange will produce different future cash flows

straight line depreciation

most common method- cost minus salvage value divided by life in years

units of production method

cost minus salvage value divided by life in units. annual depreciation is units each year times rate per unit

Double declining balance method

accelerated method- 2 divided by life to get rate, declining balance is book value- salvage value is disregarded in calculation except cannot depreciate beyond that limit

Book value of an asset

cost minus accumulated depreciation

amortization

spreading cost of asset over useful life- used for intangibles except goodwill

depletion

spreading cost of natural resources - method is units of production- cost divided by expected production- not recorded as expense until resource is sold

goodwill

unidentifiable asset- only recorded when buy another company- excess of purchase price over fair value of identifiable net assets

patent

exclusive right to a product or process

copyright

exclusive right to written material, music, etc.

franchise

intangible asset- amount paid for right to use company such as MCDonalds products, etc.

impairment of an asset

permanent decrease in value of an asset, such as goodwill- when it occurs, expense should be recognized

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