Flashcards
Key Terms Chapter 17: Depreciation
Cards in this deck (18)
- 1Accelerated Cost Recovery System (ACRS)Tax law enacted in 1981 for assets put in service from 1981 through 1986.
- 2Accelerated depreciationComputes more depreciation expense in the early years of the asset’s life than in the later years.
- 3Accumulated depreciationAmount of depreciation that has accumulated on plant and equipment assets.
- 4Asset CostAmount company paid for the asset.
- 5Book valueCost less accumulated depreciation.
- 6Declining-balance methodAccelerated method of depreciation. The depreciation each year is calculated by book value beginning each year times the rate.
- 7DepreciationProcess of allocating the cost of an asset (less residual value) over the asset’s estimated life.
- 8Depreciation expenseProcess involving asset cost, estimated useful life, and residual value (salvage or trade-in value).
- 9Depreciation scheduleTable showing amount of depreciation expense, accumulated depreciation, and book value for each period of time for a plant asset.
- 10Estimated useful lifeHow long asset will be in use.
- 11General Depreciation System (GDS)Most common (MACRS) system to calculate depreciation.
- 12Modified Accelerated Cost Recovery System (MACRS)Part of Tax Reform Act of 1986 that revised depreciation schedules of ACRS. Tax Bill of 1989, 2010 updates MACRS.
- 13Residual valueEstimated value of a plant asset after depreciation is taken (or end of useful life).
- 14Salvage valueCost less accumulated depreciation.
- 15Straight-line methodMethod of depreciation that spreads an equal amount of depreciation each year over the life of the assets.
- 16Straight-line rate (rate of depreciation)One divided by number of years of expected life.
- 17Trade-in valueEstimated value of a plant asset after depreciation is taken (or end of useful life).
- 18Units-of-production methodDepreciation method that estimates amount of depreciation based on usage.