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Fin Acc: Chapter 8 Vocab: Operating Assets: Property, Plant, and Equipment, Natu

Terms

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Acquisition Cost
The amount that includes all of the cost normally necessary to acquire an asset and prepare it for its intended use.
Capitalization of interest
Interest on constructed assets is added to the asset account.
Depreciation
The allocation of the original cost of an asset to the periods benefited by it use.
Land Improvements
Costs that are related to land but that have a limited life.
Straight-line method
A method by which the same dollar amount of depreciation is recorded in each year of asset use.
Book Value
The original cost of an asset minus the amount of accumulated depreciation.
Units of Production Method
Depreciation is determined as a function of the number of units the asset produces.
Accelerated Depreciation
A higher amount of depreciation is recorded in the early years and a lower amount in the later years.
Double declining-balance method
Depreciation is recorded at twice the straight-line rate, but the balance is reduced each period.
Change in Estimate
A change in the life of the asset or in its residual value.
Capital Expenditure
A cost that improves the asset and is added to the asset account.
Revenue Expenditure
A cost that keeps an asset in its normal operating condition and is treated as an expense.
Gain on sale of asset
The excess of the selling price over the asset's book value.
Loss on sale of asset
The amount by which selling price is less than book value.
Natural Resources
Assets that are consumed during their use.
Intangible assets
Assets with no physical properties.
Goodwill
The excess of the purchase price to acquire a business over the value of individual net assets acquired.
Research and development costs
Costs incurred in the discovery of new knowledge.
Cash dividends
most common form of dividend declared on one date, paid out another date, paid to stockholders another date (3)
1) date of declaration
cash dividends are declared
2) payment date
paid out
3) date of record
dividends are paid to stockholders

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