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21 Cards in this Set
- Front
- Back
Capital expenditures
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Costs incurred to acquire a long-lived asset. Expenditures that will benefit several accounting periods.
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Capitalize
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A verb with two different meanings in accounting. First, to debit an expenditure to an asset account, rather than directly to expense. Second, to estimate the value of an investment by annual return/investor's required rate of return
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Depletion
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Allocating the cost of a natural resource to the units removed as the resource is mined, pumped, cut, or otherwise consumed.
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Depreciation
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The systematic allocation of the cost of an asset to expense over the years of its estimated useful life.
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Fixed-percentage-of-declining-balance depreciation
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An accelerated method of depreciation in which the rate is a multiple of the straight-line rate and is applied each year to the undepreciated cost of the asset. Ex: Double Straight-line rate.
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goodwill
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The present value of expected future earnings of a business in excess of the earnings normally realized in the industry. Recorded when a business entity is purchased at a price in excess of the fair value of its net identifiable assets less liabilities.
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half-year convention
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The practice of taking six months' depreciation in the year of acquisition and in the year of disposition, rather than computing depreciation for partial period to the nearest month. Generally not used for buildings
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impairment loss
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Writing down a long-lived asset for the difference between its carrying amount less fair value.
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intangible assets
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Those assets hat are used in the operation of a business but that have no physical substance and are noncurrent. ex: patient, goodwill, etc.
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MACRS
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Modified Accelerated Cost Recovery System. The accelerated depreciation method permitted in federal income tax returns for assets acquired after 1986. Depreciation is based on prescribed recovery periods and depreciation rates.
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natural resources
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Mines, oil fields, standing timber and similar assets that are physically consumed and converted into inventory
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net identifiable assets
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The total of all assets minus liabilities
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noncash charge or expense
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A charge against earnings- either an expense or a loss- that does not require a cash expenditure at or near the time of recognition. Thus, the charge reduces net income but does not affect cash flows. Ex: depreciation and write-off of assets from impairment
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plant assets
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Long-lived assets that are acquired for use in business operations rather than for resale to customers.
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Present value
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the amount that a knowledgeable investor would pay today for the right to receive future cash flows.
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Residual (salvage) value
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The portion of an asset's cost expected to be recovered through sale or trade-in of the asset at the end of its useful life.
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revenue expenditures
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Expenditures that will benefit only the current accounting period
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straight-line depreciation
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A method of depreciation that allocates the cost of an asset (minus residual value) equally to each year of its useful life.
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sum-of-the-years' digits (SYD) deprecation
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A long-established but seldom-used method of accelerated depreciation. Usually produces results between 200% and 150% declining-balance methods
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tangible plant assets
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Plant assets that have physical substance but that are not natural resources. Ex: building, land, all types of equipment
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units-of-output
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A depreciation method in which cost (minus residual value) is divided b the estimated units of lifetime output. The unit depreciation cost is multiplied by the actual unit of output each year to compute the annual depreciation expense.
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