Term
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Definition
| requires that all companies record plant assets at cost...includes all expenditures necessary to aquire and make it ready for its intended use. |
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Term
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Definition
| A cost is not included in a plant asset account and must be expensed immediately. |
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Term
Capital Expenditures
Improperly Capitalized Expenditures |
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Definition
| Costs that are not expensed immediately but instead are included ina plant asset account. |
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Term
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Definition
| equal to the fair market value of the asset given up or the fair market value of the asset received. |
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Term
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Definition
| All necessary cost incurred in making the land ready for ites inteded use. Debit Land account |
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Term
| to record purchase of machinery and related expenditures |
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Definition
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Term
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Definition
Reduced Risk of obsolescence.
Little or no down payment
Shared tax advantages
Assets and liabilites not reported |
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Term
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Definition
| cost - accumulated depreciation |
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Term
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Definition
| the process by which an asset becomes out of date before it physically wears out. |
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Term
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Definition
companies expense an equal amount of depreciation each year of the asset's useful life.
Cost - salvage value = Depreciable cost
Depreciable cost/useful life(yrs)= Depreciable Expense
Computation:
yr dep.cost rate
2010 12000 x 20% = annual depreciation expense |
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Term
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Definition
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Term
| Prorate the annual depreciation |
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Definition
| when an asset is purchased during the year...if purchased april 1, 2010 then depreciation would be: 12000x20% x 9/12 = $1800 |
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Term
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Definition
Accelerated depreciation method: higher depreciation in earlier years. declining book value (cost - accumulated depreciation)
(Book value @ beg of yr)x(declining balance rate)= Depreciation Expense
End of the yr...find accumulated dep.
2010 13000 x 40% = 5200 5200
2011 7800 40% 3120 8320
2010 4680 40% 1872 10192 |
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Term
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Definition
useful life is expressed in terms of the total units of production or use expected fromt he asset. ex. miles
Depreciable cost/total units of activity = Depreciable cost per unit
Dep. cost per unit x units of activity during yr = Dep. Expense
Computation:
Units of Activity x Dep.cost/unit = Annual dep. expense
2010 15000 x 0.12 = 1800
2011 30000 x 0.12 = 3600
2012 20000 x 0.12 = 2400 |
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Term
| Modified Accelerated Cost Recovery System (MACRS) |
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Definition
| For tax purposs, taxpayers must use on their taxt returns either the straight line method or a special accelerated depreciation method |
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Term
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Definition
| (cost - salvage value)/useful life |
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Term
| To record annual depreciation |
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Definition
Depreciation Expense
Accumulated Depreciaiton-machinery |
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Term
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Definition
| if the proceeds from the sale exceed the book value |
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Term
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Definition
| if proceeds from sale are less than the book value |
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Term
| to record sale of asset at a gain |
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Definition
Cash
Accumulated Depreciation-furniture
Furniture
Gain on Disposal |
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Term
| To record sale of asset at a loss |
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Definition
Cash
Accumulated Depreciation
Loss on Disposal
Furniture |
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Term
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Definition
| Net income/ average total assets |
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Term
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Definition
| Net sales/ avg total assets |
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Term
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Definition
Profit Margin x Asset Turnover
(net income/sales) (net sales/avg total assets) |
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Term
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Definition
| the process of allocating to expense the cost of intangibles |
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Term
| to record amortization of intagible asset |
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Definition
Amortization Expense
Patent(asset) |
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