Shared Flashcard Set

Details

Accounting 2101
Dr. Oliff GSU Accounting Test 3
26
Accounting
Undergraduate 1
04/08/2010

Additional Accounting Flashcards

 


 

Cards

Term
Cost Principle
Definition
requires that all companies record plant assets at cost...includes all expenditures necessary to aquire and make it ready for its intended use.
Term
Revenue Expenditures
Definition
A cost is not included in a plant asset account and must be expensed immediately.
Term
Capital Expenditures

Improperly Capitalized Expenditures
Definition
Costs that are not expensed immediately but instead are included ina plant asset account.
Term
Cash Equivalent Price
Definition
equal to the fair market value of the asset given up or the fair market value of the asset received.
Term
Land
Definition
All necessary cost incurred in making the land ready for ites inteded use. Debit Land account
Term
to record purchase of machinery and related expenditures
Definition
Factory machinery
Cash
Term
Advantages of leasing
Definition
Reduced Risk of obsolescence.
Little or no down payment
Shared tax advantages
Assets and liabilites not reported
Term
Book value
Definition
cost - accumulated depreciation
Term
obsolescence
Definition
the process by which an asset becomes out of date before it physically wears out.
Term
Straight-Line Method
Definition
companies expense an equal amount of depreciation each year of the asset's useful life.

Cost - salvage value = Depreciable cost

Depreciable cost/useful life(yrs)= Depreciable Expense

Computation:
yr dep.cost rate
2010 12000 x 20% = annual depreciation expense
Term
Depreciable cost
Definition
cost - salvage value
Term
Prorate the annual depreciation
Definition
when an asset is purchased during the year...if purchased april 1, 2010 then depreciation would be: 12000x20% x 9/12 = $1800
Term
Declining Balance Method
Definition
Accelerated depreciation method: higher depreciation in earlier years. declining book value (cost - accumulated depreciation)

(Book value @ beg of yr)x(declining balance rate)= Depreciation Expense

End of the yr...find accumulated dep.

2010 13000 x 40% = 5200 5200
2011 7800 40% 3120 8320
2010 4680 40% 1872 10192
Term
Units of Activity Method
Definition
useful life is expressed in terms of the total units of production or use expected fromt he asset. ex. miles

Depreciable cost/total units of activity = Depreciable cost per unit

Dep. cost per unit x units of activity during yr = Dep. Expense

Computation:
Units of Activity x Dep.cost/unit = Annual dep. expense

2010 15000 x 0.12 = 1800
2011 30000 x 0.12 = 3600
2012 20000 x 0.12 = 2400
Term
Modified Accelerated Cost Recovery System (MACRS)
Definition
For tax purposs, taxpayers must use on their taxt returns either the straight line method or a special accelerated depreciation method
Term
Depreciation Expense
Definition
(cost - salvage value)/useful life
Term
To record annual depreciation
Definition
Depreciation Expense
Accumulated Depreciaiton-machinery
Term
Gain on Disposal
Definition
if the proceeds from the sale exceed the book value
Term
Loss on disposal
Definition
if proceeds from sale are less than the book value
Term
to record sale of asset at a gain
Definition
Cash
Accumulated Depreciation-furniture
Furniture
Gain on Disposal
Term
To record sale of asset at a loss
Definition
Cash
Accumulated Depreciation
Loss on Disposal
Furniture
Term
Return on Asset Ratio
Definition
Net income/ average total assets
Term
Asset Turnover Ratio
Definition
Net sales/ avg total assets
Term
Profit Margin ratio
Definition
Profit Margin x Asset Turnover
(net income/sales) (net sales/avg total assets)
Term
Amortization
Definition
the process of allocating to expense the cost of intangibles
Term
to record amortization of intagible asset
Definition
Amortization Expense
Patent(asset)
Supporting users have an ad free experience!