6:50 PM Thu Apr 20 Amortization The allocation of the cost of a limited-life in- tangible asset to expense over its useful life in a systematic and rational manner (p. 401). Capital expenditures Expenditures that increase the com- pany's investment in productive facilities (p. 395). Copyright Exclusive grant from the federal government that allows the owner to reproduce and sell an artistic or pub- lished work (p. 402). Declining-balance method Depreciation method that ap- plies a constant rate to the declining book value of the as set and produces a decreasing annual depreciation expense over the useful life of the asset (p. 391). Depreciable cost The cost of a long-term asset less its sal- vage value (p. 388). Franchise A contractual arrangement under which the tran- chisor grants the franchisee the right to sell certain prod- ucts. render specific services. or use certain trademarks or trade names. usually within a designated geographical area (p. 403). Goodwill The value of all favorable attributes that relate to a business enterprise (p. 403). Intangible assets Rights. privileges. and competitive advan- tages that result from the ownership of long-lived assets that do not possess physical substance (p. 401). Licenses Operating rights to use public property. granted to a business enterprise by a governmental agency (p. 403). Long-term assets Tangible resources that are used in the op- erations of the business and are not intended for sale to cus- tomers (p. 383). EXERCISE; _ 13-1 Ellen catering acquires a delivery truck at a cost of 336.000. The truck is expected to have a salvage value of $2.000 at the end of its four-year useful life. Compute annual depreciation for the first and second years using the straight-line method. 13-2 On January 1. 2008. the Villarcal Mexican Bakery ledger shows Equipment $40,000 and Exercises 407 Modied Accelerated Cost Recovery System (MACRS) De- preciation method whereby assets are classified into recov- ery classes and are depreciated at an accelerated rate (p. 393). Ordinary repairs Expenditures to maintain the operating ef- ficiency and productive life of the unit (p. 395). Patent An exclusive right issued by the US. Patent Office that enables the recipient to manufacture. sell. or otherwise control an invention for a period of twenty years from the date of the grant (p. 402). Revenue expenditures Expenditures that are immediately charged against revenues as an expense (p. 395). Salvage value An estimate of an asset's value at the end of its useful life (p. 387). Straight-line method Depreciation method in which periodic depreciation is the same for each year of the asset's useful life (p. 388). Sum-oi-years'digits method Depreciation method in which the digits of the years of the asset's expected useful life are totaled as the denominator of the calculation and the years' digits are used in reverse order as the numerator for depre- ciation (p. 392). Trademark (trade name) A word. phrase. jingle. or symbol that identifies a particular enterprise or product (p. 402). Units-of-acvity method Depreciation method in which use- ful life is expressed in terms of the total units of production or use expected from an asset (p. 389). Useful life An estimate of the expected productive life. also called service life. of an asset (p. 387). Compute straight-line depreciation. {SO 3} Compute revised depreciation. {50 A] Accumulated Depreciation $9.000.The depreciation resulted from using the straight-line method with a useful life of ten years and salvage value of $4.000. On this date. the company concludes that the equipment has a remaining useful life of only five years with the same salvage value. Compute the revised annual depreciation. 13-3 Prepare journal entries to record the following: (a) Mayorga Fine Foods retires its delivery equipment. which cost $45,000. Accumulated de- preciation is also $45,000 on this delivery equipment. No salvage value is received. "1) Assume the same information as (a), except that accumulated depreciation for Mayorga Fine Foods is $41,000. instead of $45,000. 13-4 Tuscany Tours uses the units-of-activity method in depreciating its buses. One bus was purchased on January 1.2003, at a cost of $115,000. Over its five-year useful life, the bus is ex- pected to be driven 100.000 miles Salvage value is expected to be $9,000. Instructions in) Compute the depreciation cost per unit. (11) Prepare a depreciation schedule assuming actual mileage was: 2008. 24.000: 2009. 36.000: 2010. 20.000: and 201 1. 20.000. 13-5 On March 1. 2006, Tanger Resorts acquired real estate on which it planned to construct a small bed-and-breakfast.The company paid 590.000 in cash. An old warehouse on the prop- erty was razed at a cost of $6.600: the salvaged materials were sold for $1,700. Additional ex- penditures before construction began included $1.100 attorney's fee for work concerning the land purchase. $5.000 real estate broker's fee. $7.800 architect's fee. and $14,000 to put in drive- way and a parking lot. Prepare entries for disposal by retirement. :50 6] Cbuzpittr depreciation under imits-of-activity mrdmd. {SO 3] Determine acquisition costs on fund. (50 I] III # '4')