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Chapter 16
Dansby for Accounting II
20
Accounting
Undergraduate 1
02/03/2011

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Term
a depreciation method that allows for larger amounts of depreciation in early years and smaller amounts in later years; the double declining-balance method is an example
Definition
accelerated method of depreciation
Term
the total depreciation from the start of the life of a plant asset to any point in time
Definition
accumulated depreciation
Term
a capital expenditure that literally adds on to an existing plant asset; the cost of an addition is debited to a plant asset account
Definition
addition
Term
the periodic write-off of the cost of an intangible asset
Definition
amortization
Term
a capital expenditure that improves a plant asset, such as placing siding on a building; the cost of a betterment is debited to a plant asset account
Definition
betterment
Term
in an exchange of plant assets, the difference between the price of the new asset and the trade-in allowance granted for the old asset
Definition
boot
Term
an expenditure for a plant asset that benefits more than one accounting period; examples include additions, betterments, and extraordinary repairs; capital expenditures increase either the value or the life of the asset and are debited to either a plant asset account or its Accumulated Depreciation account, depending on the type of expenditure
Definition
capital expenditure
Term
the expense resulting from the using up of a natural resource
Definition
depletion
Term
the expense that results from the allocation process of depreciation
Definition
depreciation expense
Term
a table that lists for a plant asset the amount of depreciation for each year and the accumulated depreciation and book value of that plant asset at the end of each year
Definition
depreciation schedule
Term
a depreciation method that allows greater depreciation in the early years of the life of a plant asset and less depreciation in later years; achieved by applying a constant rate to each year's decreasing book value
Definition
double declining-balance method
Term
the amount of time that an asset is expected to be in use or the amount of output it is expected to produce
Definition
estimated useful life (EUL)
Term
a capital expenditure that prolongs the life of a plant asset, such as new wiring in a building; the cost of an extraordinary repair is debited to the Accumulated Depreciation account
Definition
extraordinary repair
Term
a long-term asset used in a business that lacks physical substance; examples include patents, copyrights, trademarks, and franchises
Definition
intangible asset
Term
an asset account to which the cost of improvements to real estate, such as sidewalks, driveways, fences, and parking lots (all of which have a limited life), are debited
Definition
Land Improvements account
Term
a long-term asset that is acquired to extract or remove resources from the ground; examples include oil wells, coal mines, and forests; also referred to as a wasting assets
Definition
natural resource
Term
an expenditure for a plant asset that benefits only the current accounting period; examples include repairs and maintenance expenses; debited to an expense account
Definition
revenue expenditure
Term
the amount that an asset is expected to be worth at the end of its productive life; also referred to as scrap value, trade-in value, and residual value
Definition
salvage value
Term
the annual percent of depreciation in the straight-line method; calculated by dividing 100% by the estimated years of life
Definition
straight-line rate
Term
a depreciation method in which cost is allocated over the estimated productive life of a plant asset, and life is expressed by such measures as hours, units, or miles
Definition
units-of-production method
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