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