KEY TERMS INTRODUCED OR EMPHASIZED IN CHAPTER 9

accelerated depreciation Methods of depreciation that call for recognition of relatively large amounts of depreciation in the early years of an asset’s useful life and relatively small amounts in the later years.

amortization The systematic write-off to expense of the cost of an intangible asset over the periods of its economic usefulness.

book value The cost of a plant asset minus the total recorded depreciation, as shown by the Accumulated Depreciation account. The remaining undepreciated cost is also known as carrying value.

capital expenditures Costs incurred to acquire a long-lived asset. Expenditures that will benefit several accounting periods.

capitalize A verb with two different meanings in accounting. The first is to debit an expenditure to an asset account, rather than directly to expense. The second is to determine the amount of an investment by dividing the annual return by the investor’s required rate of return.

depletion Allocating the cost of a natural resource to the units removed as the resource is mined, pumped, cut, or otherwise consumed.

depreciation The systematic allocation of the cost of an asset to expense over the years of its estimated useful life.

fixed-percentage-of-declining-balance depreciation An accelerated method of depreciation in which the rate is a multiple of the straight-line rate and is applied each year to the undepreciated cost of the asset. The most commonly used rate is double the straight-line rate.

goodwill The present value of expected future earnings of a business in excess of the earnings normally realized in the industry. Recorded when a business entity is purchased at a price in excess of the fair value of its net identifiable assets (excluding goodwill) less liabilities.

half-year convention The practice of taking six months’