ECON FINALS

• Depreciation - means the decrease in the value of physical properties or assets with the passage of time and use. It is the non-cash method of representing the reduction in value of a tangible asset.
• First Cost (FC) or Cost Basis - is the unadjusted cost basis of an asset. It is the initial cost of acquiring an asset.
• Book Value (BV) - is the original cost basis of the property including any adjustments, less all allowable depreciation deductions.
• Market Value (MV) - is the amount paid to a willing seller by a willing buyer of an asset.
• Salvage Value (SV) - is the estimated value of a property at the end of a property's life.
• Recovery Period - is the number of years of an asset's recovery.
• Usual Life (n) - is the anticipated period of a property's life.
• Adjusted Cost Basis - is the asset's original cost basis used to compute depreciation deductions adjusted by allowable increases or decreases.
• Straight Line Method - is the simplest depreciation method. It assumes that a constant amount is depreciated each year over the useful life of the property.
• Declining Balance Method is sometimes called the Constant-Percentage Method or the Matheson formula. The assumption in this depreciation method is that the annual cost of depreciation is the fixed percentage (1 - K) of the Book Value (BV) at the beginning of the year.
• Sum of the Years Digit Method is an accelerated depreciation technique based on the assumption that tangible properties are usually productive when they are new, and their use decreases as they become old.
• Sinking Fund Method - is a depreciation method wherein funds will accumulate for replacement purposes.
• Working Hours Method also called as Service Output Method - is a depreciation method that results in the cost basis allocated equally over the expected number of units produced during the period of tangible properties.
• Constant Unit Method - is the same with Working Hours Method in the structure of the formula