accelerated depreciation methods
records the highest depreciation in the first year of an asset's service life and lower depreciation in subsequent years
accumulated depreciation
total amount of depreciation expense recorded over the life of an asset to date
amortization expense
portion of the acquisition cost of an intangible asset that a company allocates as an expense to each accounting period over the asset's service life
book value
asset's original cost minus the related accumulated depreciation
capital expenditure
cost that increases the benefits a company will obtain from an asset
copyright
exclusive right granted by the US government to publish or sell literary or artistic products for the life of the author plus an additional 70 years
depreciable cost
cost of a physical asset less its residual value
depreciation expense
part of the cost of property, plant, and equipment (physical asset) that a company allocates as an expense to each accounting period in which the company uses the asset
depletion expense
portion of the cost (less the estimated residual value) of a natural resource asset that a company allocates as an expense to each accounting period over the asset's service life
development
translation of research into a plan or design for a new or improved product or process
double declining balance method
computes depreciation expense by multiplying the book value of an asset at the beginning of the period by twice the straight line rate
estimated residual value
cash a company estimates it will receive from the sale or disposal of an asset at the end of its estimated service life
estimated service life
life over which a company expects an asset to be useful
franchise
agreement entered into by two parties where, for a fee, one party gives the other party rights to perform certain functions or sell certain products or services over the legal life of the franchise
functional causes
limit the life of the asset, even though the physical life is not exhausted
goodwill
difference between the total price a company paid to buy another company and the market value of the identifiable net assets it acquired
intangible assets
company's long term assets that do not have a physical substance
maintenance and customer support costs
computer software costs that a company incurs after it releases the software
modified accelerated cost recovery system
accelerated depreciation method acceptable acceptable under the internal revenue code and used by income tax purposes
natural resource asset
assets that are used up as they are extracted, mined, dug up, or chopped down
net asset value
cost of an asset less its accumulated depreciation
operating capability
company's ability to continue a given level of operations
operating efficiency
how well a company uses its assets to generate revenue
operating expenditure
cost that only maintains the benefits that a company originally expected from an asset
patent
exclusive right granted by the US government giving the owner of an invention the control of its manufacture or sale for 20 years from the date of the patent application
physical causes
include wear and tear due to use, deterioration and decay caused by the passage of time, and damage and destruction
property, plant and equipment
all of the physical (tangible) long term assets a company uses in its operations
rational
a characteristic of depreciation that relates it to the benefits an asset produces in any period
research
activity aimed at the discovery of new knowledge intended for use in developing a new or improved product or process
software production costs
costs of designing, coding, testing, and preparing documentation and training materials
straight line method
computes depreciation expense by allocating the cost of an asset, less its estimated residual value, equally to each period of the asset's estimated service life
sum of the years digits method
computes depreciation expense by multiplying the depreciable cost of an asset by a fraction that declines each year
systematic
following a formula for the calculation of depreciation
trademark or tradename
exclusive right granted by the US government (or the government of another country) to use a name or symbol for product identification
unit cost
computer software cost of producing software, such as costs of the disks and the duplication of the software, packaging, documentation, and training materials
units of production method
used to compute depletion (or depreciation) based on the level of an asset's physical activity