Accounting

goodwill

represents the value of all favorable attributes that relate to a company that are not attributable to any other specific asset

Plant assets

resources that have three characteristics 1. physical substance 2. used in the operations of a business 3. are not intended for sale to customers

straight line

companies expense the same amount of depreciation for each year of the asset's useful life. it is measured solely by the passage of time.

natural resources

consist of standing timber and underground deposits or oil, gas, and minerals. These long lived productive assets have two distinguishing characteristics 1. they are physically extracted in operations 2. they are replaceable only by an act of nature.

buildings

facilities used in operations, such as stores, offices, factories, and warehouses

depletion

the allocation of the cost of natural resources to expense in a rational and systematic manner over the resources useful life

factors in computing depreciation

1. cost 2. useful life 3. salvage value

depreciation methods

1. straight line 2. units of activity 3. declining balance

asset turnover ratio

analyzes the productivity of a company's assets

additions and improvements

are costs incurred to increase the operating efficiency, productive capacity, or useful life of a plant asset.

research and development costs

are expenditures that may lead to patents, copyrights, new processes, and new products.

ordinary repairs

are expenditures to maintain the operating efficiency and productive life of the unit.

intangible assets

are rights, privileges, and competitive advantages that result from the ownership of long live assets that do not possess physical substance

land improvements

are structural additions. examples: driveways, parking lots, fences, ect

depreciation cont..

depreciation is a process of cost allocation. it is not a process of asset valuation

copyrights

give the owner the exclusive right to reproduce and sell and artistic or published work

revenue expenditures

immediately charged as an expense against revenues

equipment

includes assets used in operations, such as store check out counters, office furniture, factory machinery, delivery trucks

useful life

is a estimate of the expected productive life

trademark or trade name

is a word, phrase, jingle, or symbol that identifies a particular enterprise or product

salvage value

is an estimate of the asset's value at the end of its useful life

patent

is an exclusive right issued by the us patent office that enables the recipient to manufacture, sell, or otherwise control and invention for a period of 20 years from the date of the grant

depreciation cost

is the cost of the asset less its salvage value

depreciation definition

is the process of allocating to expense the cost of a plant asset over its useful life in a rational and systematic manner

declining balance

produces a decreasing annual depreciation expense over the asset's useful life.

materiality concept

states that if an item would not make a difference in decision making, the company does not have to follow GAAP in reporting that item

going concern assumption

states that the company will continue in operation for the foreseeable future

accelerated depreciation method

the declining balance method produces higher depreciation expense in the early years than in the later years

amorization

the process of allocating the cost of intangibles

Property, plant, and equipment; plant and equipment; and fixed assets

these assets are expected to provide services to the company for a number of years

licenses

use of city streets for a bus line or taxi service, use of public land for telephone and electric lines, and the use of airwaves for radio or tv broadcasting

land

used for a building of a site for a manufacturing plant or office site

units of activity

useful life is expressed in terms of the total units of production or use expected from the asset, rather than as a time period