Podcast
Questions and Answers
What are plant assets?
What are plant assets?
What is depreciation?
What is depreciation?
Process of allocating the cost of a plant asset to expense in the accounting periods benefiting from its use
What is salvage value?
What is salvage value?
Estimate of the asset's value at the end of its benefit period
What does 'useful life' refer to?
What does 'useful life' refer to?
Signup and view all the answers
What is the result of obsolescence?
What is the result of obsolescence?
Signup and view all the answers
What is accelerated depreciation?
What is accelerated depreciation?
Signup and view all the answers
What are capital expenditures?
What are capital expenditures?
Signup and view all the answers
Define 'natural resources'.
Define 'natural resources'.
Signup and view all the answers
Match the following intangible assets with their definitions:
Match the following intangible assets with their definitions:
Signup and view all the answers
What is an impairment?
What is an impairment?
Signup and view all the answers
What is depletion?
What is depletion?
Signup and view all the answers
Study Notes
Plant Assets
- Tangible assets utilized in company operations, with a useful life exceeding one accounting period.
- Also known as plant and equipment, property, plant, and equipment, or fixed assets.
Cost
- Encompasses all reasonable expenses necessary to prepare an asset for its intended use.
Land Improvements
- Assets with limited useful lives that get consumed, such as parking lots, fences, and lighting systems.
Depreciation
- Method of spreading the cost of a plant asset over its beneficial accounting periods.
Salvage Value
- Estimated value of an asset at the end of its useful life, also referred to as residual or scrap value.
Useful Life
- Duration during which an asset is expected to be used productively by a company.
Inadequacy
- Occurs when a company’s plant assets lack sufficient capacity to meet increasing production demands.
Obsolescence
- A condition where a plant asset loses its utility in producing goods or services due to innovations or improvements.
Straight-line Depreciation
- Constant annual expense charged throughout the asset's useful life.
Units-of-Production Depreciation
- Varies the expense charged based on the asset's actual usage each period.
Accelerated Depreciation Method
- Leads to higher depreciation expenses earlier in an asset's life with lower amounts in later years.
Declining Balance Method
- Applies a depreciation rate to the asset’s beginning book value, which is a multiple of the straight-line rate.
Change in Accounting Estimate
- Involves revising the useful life or salvage value estimates of a plant asset.
Impairment
- Recognizes a permanent decrease in the fair value of an asset compared to its book value.
Revenue Expenditures
- Additional costs that maintain but do not materially enhance an asset’s life or capabilities.
Capital Expenditures
- Costs that extend benefits of plant assets beyond the current period.
Ordinary Repairs
- Costs incurred to maintain an asset in optimal operating condition.
Betterments
- Enhancements that improve an asset's efficiency or productivity.
Extraordinary Repairs
- Costs that extend the useful life of an asset beyond its original estimate.
Natural Resources
- Assets that get physically consumed in the process of use.
Depletion
- Allocating the cost of a natural resource to the periods in which it is consumed.
Intangible Assets
- Nonphysical assets providing long-term rights, privileges, or competitive advantages.
Indefinite Life
- Intangible assets without limiting factors on their useful life, thus not subject to amortization.
Patent
- Exclusive rights for 20 years to manufacture, sell a patented item, or use a patented process.
Copyright
- Exclusive rights to publish and sell artistic works during the creator's life plus 70 years.
Franchises and Licenses
- Permissions granted to deliver products or services under specific conditions.
Trademark or Trade (Brand) Name
- Symbols, names, phrases, or jingles associating with a company, product, or service.
Goodwill
- Value exceeding a company's identifiable assets and liabilities, reflecting its overall worth.
Lease
- A contract permitting property to be rented.
Lessor
- The owner of the property who grants the lease.
Lessee
- The individual or entity that secures the right to use and possess the property.
Leasehold
- Rights granted by the lessor to the lessee as per the lease agreement.
Leasehold Improvements
- Changes and enhancements made to leased properties.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge on plant assets, their costs, and depreciation methods. This quiz covers essential concepts such as salvage value, useful life, and conditions like inadequacy and obsolescence. Perfect for accounting students or professionals seeking a refresher.
