ACCT 301 Chapter 10

start-up costs

Whenever a company introduces a new product or service, or commences business in a new territory or with a new customer

expected cash flow approach

adjusts the cash flows, not the discount rate, for the uncertainty or risk of those cash flows

franchise

contractual arrangement under which the franchisor grants the franchisee the exclusive right to use the franchisor's trademark or tradename and may include product and formula rights, within a geographical area, usually for a specified period of time.

restoration costs

costs to restore land or other property to its original condition after extraction of the natural resource ends

copyright

exclusive right of protection given to a creator of a published work, such as a song, film, painting, photograph, or book

trademark (tradename)

exclusive right to display a word, a slogan, a symbol, or an emblem that distinctively identifies a company, a product, or a service

patent

exclusive right to manufacture a product or to use a process.

exploration costs

expenditures such as drilling a well, or excavating a mine, or any other costs of searching for natural resources.

specific interest method

for interest capitalization, rates from specific construction loans to the extent of specific borrowings are used before using the average rate of other debt

weighted-average method

for interest capitalization, weighted-average rate on all interest-bearing debt, including all construction loans, is used

development costs

for natural resources, costs incurred after the resource has been discovered but before production begins

asset retirement obligations (AROs)

obligations associated with the disposition of an operational asset.

natural resources

oil and gas deposits, timber tracts, and mineral deposits

intangible assets

operational assets that lack physical substance; examples include patents, copyrights, franchises, and goodwill

acquisition costs

the amounts paid to acquire the rights to explore for undiscovered natural resources or to extract proven natural resources

land improvements

the costs of establishing parking lots, driveways, and private roads and the costs of fences and lawn and garden sprinkler systems.

technological feasibility

the point in time "when the enterprise has completed all planning, designing, coding, and testing activities that are necessary to establish that the product can be produced to meet its design specifications including functions, features, and technical performance requirements."25

capital budgeting

the process of evaluating the purchase of operational assets

fixed-asset turnover ratio

used to measure how effectively managers used PP&E (property, plant, and equipment) net sales / average fixed assets

property, plant, and equipment

land, buildings, equipment, machinery, autos, and trucks

accretion expense

the increase in an asset retirement obligation that accrues as an operating expense