Term
| accelerated-depreciation method |
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Definition
| a depreciation method that produces higher depreciation expense in the early years than the stright-line approach |
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Term
| additions and improvements |
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Definition
| costs incurred to increase the operating efficiency, productive capactiy, or expected useful life of a plant asset |
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Definition
| the process of allocating to expense the cost of an intangible asset |
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| indicates how efficiently a company uses its assets to generate sales; calculated as net sales divided by average total assets |
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Definition
| expenditures that increase the company;s investment in plant assets |
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Definition
| a contractual agreement allowing one party (the lessee) to use another party's asset (the lessor); accounted for like a debt-financed purchase by the lessee |
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Definition
| an exclusive right granted by the federal government allowing the owner to reproduce and sell an artistic or published work |
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Definition
| a depreciation method that applies a consant rate to the declining book value of the asset and produces a decreasing annual depreciation expense over the asset's useful life |
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| the cost of plant asset less its salvage value |
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Definition
| the process of allocating to expense the cost of a plant asset over its useful life in a rational and systematic manner |
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Definition
| 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, usuallly within a designated geographic area |
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Definition
| the value of all favorable attributes that relate to a company that are not attributable to any other specific asset. |
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Definition
| a permanent decline in the market value of an asset |
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Term
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Definition
| rights, privileges, and competitive advantages that result from the ownership of long-lived assets that do not possess physical substance |
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Definition
| a party that has made contractual arrangements to use another party's assets for a period at an agreed price |
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Term
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Definition
| a party that has agreed contractually to let another party use its asset for a period at an agreed price |
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Term
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Definition
| operating rights to use public property, granted by a governmental agency to a business |
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Definition
| 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 |
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Definition
| expenditures to maintain the operating efficiency and expected productive life of the asset |
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Definition
| an exclusive right inssued 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 |
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Term
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Definition
| tangible resources that have physical substance, are used in the operations of the business, and are not intended for sale to customers |
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Term
| research and development costs |
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Definition
| expenditures that may lead to patents, copyrights, new processes, and new products; must be expensed as incurred |
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Term
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Definition
| a profitability measure that indicates the amount of net income generated by each dollar of assets; computed as net income divided by average assets |
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Term
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Definition
| expenditures that are immmediately charged against revenues as an expense |
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Term
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Definition
| a method in which companies expense an equal amount of depreciation for each year of the asset's useful life. |
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Definition
| a word, phrase, jingle, or sybol that distinguishes or identifies a particular enterprise or product |
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Term
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Definition
| a deprectiation method in which useful life is expressed in terms of the total units of production or use expected form the asset |
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Term
| describe how the cost principle applies to plant assets |
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Definition
| the cost of plant assets includes all expenditures necessary to acquire the asset and make it ready for its intended use. Cost is measured by the cash or cash equivalent price paid |
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Term
| explain the concept of depreciation |
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Definition
| deprectiation is the process of allocating to expense the cost of a plant asset over its useful life in a rational and systematic manner. depreciation is not a rocess of valuation, and it is not a process that results in an accumulation of cash. Depreciationreflects an asset's decreasing usefulness and revenue-producing ability, resulting from wear and tear and from obsolescence |
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Term
| compute periodic depreciation using the straight-line method, and contrast its expense pattern with those of other methods. |
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Definition
the formula for straight-line depreciation is:
(cost-salvage value)/ useful life (in years)
the expense patterns of the three depreciation methods are as follows:
straight-line=constant amount
declining-balance=decreasing amount
units-of-activity=varying amount |
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Term
| descrive the procedure for revising periodic depreciation |
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Definition
| companies make revisions of periodic depreciation in present and future periods, not retroactively |
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Term
| explain how to account for the disposal of plant assets |
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Definition
| the procedure for accounting for the disposal of a plant asset through sale or retirement is: (a) Eliminate the book value of the plan asset at the date of disposal. (b) record cash proceeds, if any. (c) account for the difference between the book value and the cash proceeds as a gain or a loss on disposal |
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Term
| compute periodic depreciation using the declining-balance method |
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Definition
| book value at beginning of year X Declining-balance rate=Depreciation expense |
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Term
| compute period depreciation using the units-of-activity method |
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Definition
depreciable cost/total units of activity=depreciation cost per unit
or
depreciation cost per unit X units of activity during year=Depreciation expense |
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Term
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Definition
| a legal document that indicates the name of the issuer; the face value of the bonds, and such other data as the contractual interest rate and the maturity date of the bonds |
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Term
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Definition
| a form of interest-bearing notes payable issued by corporations, universities, and governmental entities |
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Term
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Definition
| bonds that are the issuing company can retire at a stated dollar amount prior to maturity |
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Term
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Definition
| a contractual agreement allowing one party (the lessee) to use the assets of another party (the lessor); accounted for like a debt-financed purchase by the lessee |
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Term
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Definition
| events with unvertain outcomes that may represent potential liabilites |
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Term
| contractual (stated)interest rate |
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Definition
| rate used to determine the amount of interest the borrower pays and the investor receives |
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Term
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Definition
| bonds that can be conerted into common stock at the bondholder's option |
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Term
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Definition
| a debt that a company reasonably expecs to pay (1) from existing current assets or through the creation of other current liabilites, and (2) within one year or the operating cycle, whichever is longer. |
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Term
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Definition
| the difference between the face value of a bond and its selling price when a bond is sold for less than its face value |
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Term
| effective-interest method of amortization |
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Definition
| a method of amortizing bond discount or bond premium that results in periodic interest expense equal to a constant percentage of the carrying value of the bonds |
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Term
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Definition
| rate established when bonds are issued that remains constant in each interest period |
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Term
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Definition
| amoutn of principal due at the maturity date of the bond |
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Term
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Definition
| obligations that a company expects to pay more than one year in the future |
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Term
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Definition
| the rate investors demand for loaning funds to the corporation |
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Term
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Definition
| the date on which the final payment on a bond is due from the bond issuer to the inestor |
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Term
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Definition
| a long-term note secured by a mortgage that pledges title to specific assets as security for the loan |
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Term
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Definition
| an obligation in the form of a written note |
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Term
| off-balance-sheet financing |
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Definition
| the intentional effort by a company to structure its financing arrangements so as to aboid showing liabilities on its balance sheet |
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Term
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Definition
| a contractual agreement allowing one party (the lessee) to use the asset of another party (the lessor); accounted for as a rental |
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Term
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Definition
| the difference between the sellin price and the face value of a bond when a bond is sold for more than its face value |
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Term
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Definition
| the value today of an amount to be received at some date in the future after taking into account current interest rates |
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Term
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Definition
| bonds that have specific assets of the issuer pledged as collateral |
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Term
| Advantages to Leasing vs. Purchasing |
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Definition
1) Reduced rise of obsolescensce
- Frequently, the lessee can exchange the asset for a more modern one it becomes outdated. Much easier than trying to sell the obsolete asset
2)Little or no down payment
3) Shared tax advantages
- in a lease, the lessor gets the tax advantages become it owns the asset. it often passes the tax savings on to the lessee in the form of lower lease payments.
4) Assets and Liabilities not reported
- Operating Leases allow the lessee to account for the transaction as a rental, with neither an asset of liability recorded |
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