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27 terms

Chapter 9: Plant Assets, Natural Resources, and Intangible Assets

Financial Accounting, Seventh Edition Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso
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Accelerated-depreciation method
Depreciation method that produces higher depreciation expense in the early years than in the later years.
Additions and improvements
Costs incurred to increase the operating efficiency, productive capacity, or useful life of a plant asset.
Amortization
The allocation of the cost of an intangible asset to expense over its useful life in a systematic and rational manner.
Asset turnover ratio
A measure of how efficiently a company uses its assets to generate sales; calculated as net sales divided by average total assets.
Capital expenditures
Expenditures that increase the company's investment in productive facilities.
Copyright
Exclusive grant from the federal government that allows the owner to reproduce and sell an artistic or published work.
Declining-balance method
Depreciation method that applies a constant rate to the declining book value of the asset and produces a decreasing annual depreciation expense over the useful life of the asset.
Depletion
The allocation of the cost of a natural resource to expense in a rational and systematic manner over the resource's useful life.
Depreciation
The process of allocating to expense the cost of a plant asset over its useful (service) life in a rational and systematic manner.
Depreciable cost
The cost of a plant asset less its salvage value.
Franchise (license)
A contractual arrangement under which the franchisor grants the franchisee the right to sell certain products, provide specific services, or use certain trademarks or trade names, usually within a designated geographical area.
Going-concern assumption
States that the company will continue in operation for the foreseeable future.
Goodwill
The value of all favorable attributes that relate to a business enterprise.
Intangible assets
Rights, privileges, and competitive advantages that result from the ownership of long-lived assets that do not possess physical substance.
Licenses
Operating rights to use public property, granted to a business enterprise by a governmental agency.
Materiality principle
If an item would not make a difference in decision making, a company does not have to follow GAAP in reporting it.
Natural resources
Assets that consist of standing timber and underground deposits of oil, gas, or minerals.
Ordinary repairs
Expenditures to maintain the operating efficiency and productive life of the unit.
Patent
An exclusive right issued by the U.S. Patent Office that enables the recipient to manufacture, sell, or otherwise control an invention for a period of 20 years from the date of the grant.
Plant assets
Tangible resources that are used in the operations of the business and are not intended for sale to customers.
Research and development (R&D) costs
Expenditures that may lead to patents, copyrights, new processes, or new products.
Revenue expenditures
Expenditures that are immediately charged against revenues as an expense.
Salvage value
An estimate of an asset's value at the end of its useful life.
Straight-line method
Depreciation method in which periodic depreciation is the same for each year of the asset's useful life.
Trademark (trade name)
A word, phrase, jingle, or symbol that identifies a particular enterprise or product.
Units-of-activity method
Depreciation method in which useful life is expressed in terms of the total units of production or use expected from an asset.
Useful life
An estimate of the expected productive life, also called service life, of an asset.