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Chapter 9
Accelerated-depreciation method
A depreciation method that produces higher depreciation
expense in the early years than in the later years. (p. 429)
Additions and improvements
Costs incurred to increase the operating efficiency, productive
capacity, or expected useful life of a plant asset. (p. 412)
Amortization
The allocation of the cost of an intangible asset to expense.
(p. 420)
Asset turnover ratio
Measure of sales volume, calculated as net sales divided by
average total assets. (p. 418)
Average age of plant assets
Measure of the age of a company's plant assets, calculated
as accumulated depreciation divided by depreciation
expense. (p. 417)
Average useful life
A comparative measure of plant assets, calculated as the
average cost of plant assets divided by depreciation expense.
(p. 416)
Capital expenditures
Expenditures that increase the company's investment in
productive facilities. (p. 400)
Capital lease
A long-term agreement allowing one party (the lessee) to use
another party's asset (the lessor). The arrangement is
accounted for like a purchase. (p. 403)
Cash equivalent price
An amount equal to the fair market value of the asset given
Lessor
A party that has agreed contractually to let another party use
its asset. (p. 402)
Licenses
Operating rights to use public property, granted by a
governmental agency to a business enterprise. (p. 423)
Operating lease
An arrangement allowing one party (the lessee) to use the
asset of another party (the lessor). The arrangement is
accounted for as a rental. (p. 403)
Ordinary repairs
Expenditures to maintain the operating efficiency and
expected productive life of the asset. (p. 412)
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. (p. 421)
Plant assets
Tangible resources that have physical substance, are used in
the operations of the business, and are not intended for sale
to customers. (p. 398)
Research and development costs
Expenditures that may lead to patents, copyrights, new
processes, and new products. (p. 422)
Revenue expenditures
Expenditures that are immediately charged against revenues
as an expense. (p. 400)
Straight-line method
A method in which periodic depreciation is the same for each
year of the asset's useful life. (p. 406)
Trademark (trade name)
A word, phrase, jingle, or symbol that distinguishes or
identifies a particular enterprise or product. (p. 422)
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. (p. 408)