Reading...
Play button
Play button
Use LEFT and RIGHT arrow keys to navigate between flashcards;
Use UP and DOWN arrow keys to flip the card;
H to show hint;
A reads text to speech;
30 Cards in this Set
- Front
- Back
|
Plant Assets
|
-Tangible resources that have physical substance, are used in the operations of the business, and are not intended for sale to customers
|
|
|
Revenue Expenditures
|
-Expenditures that are immediately charged against revenues as an expense
|
|
|
Capital Expenditures
|
-Expenditures that increase the company's investment in plant assets
|
|
|
Cash Equivalent Price
|
- An amount equal to fair market value of the asset given up or the fair market value of the asset received, whichever is more clearly determinable
|
|
|
Positives to Leasing
|
1. Reduced risk of obsolescence
2. Little or no down payment 3. Shared tax advantages 4. Assets and liabilities not reported |
|
|
Operating Leases
|
-A contractual agreement allowing one party (the lessee) to use the asset of another party (the lessor); accounted for as a rental by the lessee
|
|
|
Capital Lease
|
-A contractual agreement allowing one party (the lessee) to use another party's (the lessor); accounted for like a debt-financed purchase by the lessee
|
|
|
Depreciation
|
-the process of allocating to expense the cost of a plant asset over its useful life in a rational and systematic manner
-depreciation is a cost allocation process not an asset valuation process |
|
|
Factors in Computing Depreciation
|
1. Cost
2. Useful Life 3. Salvage Value |
|
|
Straight-Line Method
|
-A method in which companies expense an equal amount of depreciation for each year of the asset's useful life
|
|
|
Depreciable Cost
|
-The cost of a plant asset less its salvage value
Cost - Salvage value= Depreciable cost Depreciable cost / useful life = depreciation expense |
|
|
Declining-Balance Method
|
-A depreciation method that applies a constant rate to the declining book value of the asset and produces a decreasing annual depreciation expense over the asset's useful life
|
|
|
Accelerated-Depreciation Method
|
-A depreciation method that produces higher depreciation expense in the early years than the straight-line approach
|
|
|
Units-of-Activity Method
|
-A depreciation method in which useful life is expressed in terms of the total units of production or use expected from the asset
|
|
|
Ordinary Repairs
|
-Expenditures to maintain the operating efficiency and expected productive life of the asset
|
|
|
Additions and Improvements
|
- Cost incurred to increase the operating efficiency, productive capacity, or expected useful life of a plant
|
|
|
Impairment
|
-A permanent decline in the market value of an asset
Dr. Loss Cr. Asset Account |
|
|
Plant Asset Disposals- Gain on Sale/Loss on Sale
|
Cost of office Furniture
Less: Accumulated depreciation =Book value at date of disposal Proceeds from sale =Gain/Loss on disposal of plant assets |
|
|
Return on Asset Ratio
|
-A profitability measure that indicates the amount of net income generated by each dollar of assets;
(Net Income)/ (Average Total Assets) |
|
|
Asset Turnover Ratio
|
-Indicates how efficiently a company uses its assets to generate sales
(Net Sales)/ (Average Total Assets) |
|
|
Profit Margin Ratio Revisited
|
Profit Margin (net income/net sales) x Asset turnover = Return on assets
|
|
|
Intangible Assets
|
-Rights, privileges, and competitive advantages that result from the ownership of long-lived assets that do not possess physical substance
|
|
|
Amortization
|
-The process of allocating to expense the cost of an intangible asset
|
|
|
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
|
|
|
Research and Development cost
|
-Expenditures that may lead to patents, copyrights, new processes, and new products; must be expensed as incurred
|
|
|
Copyrights
|
-An exclusive right granted by the federal government allowing the owner to reproduce and sell an artistic or published work
|
|
|
Trademark
|
- A word, phrase,, jingle or symbol that distinguishes or identifies a particular enterprise or product
|
|
|
Franchise
|
- A contractual arrangement under which the franchisor grants the franchisee the right to sell certain products, to provide specific services, or to use certain trademarks or trade names, usually within a designated geographic area
|
|
|
Licenses
|
-operating rights to use public property, granted by a government agency to a business
|
|
|
Goodwill
|
-The value of all favorable attributes that relate to a company that are not attributable to any other specific assets
|
