Accounting 3 Chapter 7 Review

cash paid plus the book value of asset traded

When an asset is traded, the original cost of the new asset recorded in the accounting records is

beginning book value for the current year

When the declining depreciation method is used, the annual depreciation expense is calculated using the

MACRS

a depreciation method required by the IRS to be used for income tax calculation purposes for most plant assets

plant asset

an accounting form on which a business records information about each plant asset

units of production method

calculating the estimated annual depreciation expense based on the amount of production expected from a plant asset

Going Concern Concept

enables a business to record the cost of plant assets on the balance sheet

current assets

may be consumed within a year

depletion

The decrease in the value of a plant asset because of the removal of a natural resource

modified half-year convention

A method for calculating partial-year depreciation that recognizes a full year's depreciation if the asset is purchased in the first half of the year

real property

Land and anything attached to it is called

gain on plant asset

Sold equipment for more than book value

assessed value

The value of an asset determined by tax authorities for the purpose of calculating taxes

straight line depreciation

recording an equal amount of depreciation expense each year of an assets useful life

loss on plant asset

sold equipment for less than book value

book value of a plant asset

the original cost of a plant asset minus accumulated depreciation

millage rate

the tax used to calculate property taxes

salvage value

using the double declining-balance method of depreciation, the final year's depreciation should reduce the asset's book value to its

long term assets

will be used for a number of years