MGMT 200-- Chapter 7
trademark
like the name Apple, is a word, slogan or symbol that distinctively identifies a company, product or service
franchises
local outlets that pay for the exclusive right to use the franchisors company name and to sell its products within a specified geographical area
straight-line method
a method of computing depreciation and amortization by dividing the difference between an asset's cost and its expected salvage value by the number of years it is expected to be used.
land improvements
adding a parking lot, sidewalks, driveways, light systems, fences, sprinklers, and similar additions
amortization
allocating the cost of intangible assets to expense is called ____.
book value
also referred to as carrying value, equals the original cost of the asset minus the current balance in Accumulated Depreciation
return on assets (ROA)
equals net income/ average total assets
repairs and maintenance
expenditures like these in the period incurred because they maintain a given level of benefits
intangible assets
have no physical substance. include patents, trademarks, copyrights, franchises and goodwill
accelerated depreciation method
higher depreciation in the earlier years of an asset's life and lower depreciation in later years
accumulated depreciation
is a contra asset account, meaning it reduces an asset account (which is credited when Depreciation Expense is recorded each accounting period)
declining-balance method
is an accelerated depreciation method. ______ will be higher than straight-line depreciation in earlier years, but lower in later years
copyrights
is an exclusive right of protection given by the U.S. Copyright Office to the creator of a published work such as a song, film, painting, photograph, book, or computer software
patent
is an exclusive right to manufacture product or to use a process
profit margins
is calculated as net income divided by net sales
asset turnover
is calculated as net sales divided by average total assets
goodwill
is recorded by the acquiring company for the amount that the purchase price exceeds the fair value of the acquired company's identifiable assets (is an intangible asset)
improvement
is the cost of replacing a major component of an asset
material
it is said to be ____ if it is large enough to influence the economic decisions of users
impairment
occurs when the expected future cash flows (expected future benefits) generated for a long-term asset fall below its book value (original cost minus accumulated depreciation)
addition
occurs when we add a new major component to an existing asset
residual value
or salvage value, the value is the amount the company expects to receive from selling the asset at the end of its service life
service life
or useful life, is how long the company expects to receive benefits from the asset before disposing of it
big bath
recording all losses in one year to make a bad year even worse
natural resources
such as oil, natural gas, timber, salt
capitalize
to describe recording an expenditure (the amount of money spent) as an asset
activity-based method
we allocate an asset's cost based on its use. for example: we could measure the service life of a machine in terms of its output (units, pounds, barrels). this method also works for vehicles such as our delivery trucks, whose use we measure in miles
basket purchase
when companies purchase more than one asset at the same time for one purchase price