This document discusses accounting for long-lived assets such as plant, property, and equipment. It covers topics such as:
- Plant assets are recorded at historical cost and depreciated over their useful lives, except for land which is not depreciated.
- Depreciation methods include straight-line, declining balance, and units-of-activity, and allocate the cost of an asset over its useful life.
- Periodic depreciation expense can be revised due to changes in estimated useful life or salvage value, which are changes in accounting estimates affecting the current period and future periods.
- Long-lived assets are presented on the balance sheet net of accumulated depreciation. Notes to the financial statements
This document discusses fraud and principles of internal control. It begins by introducing the learning objectives which are to discuss fraud and internal control principles, apply them to cash, identify bank account control features, and explain cash reporting. It then defines fraud and lists the three factors that contribute to fraudulent activity. Several principles of internal control are outlined, including establishing responsibility, segregating duties, documentation procedures, physical controls, and independent internal verification. Examples are provided to illustrate how missing specific controls enabled several fraud scenarios.
Here are the steps to solve this payroll problem:
(a) Gross earnings: $40,000
FICA taxes (7.65% of $40,000): 0.0765 * $40,000 = $3,060
Federal income tax withheld: $9,000
State income tax withheld: $1,000
Net pay = Gross earnings - FICA taxes - Federal taxes - State taxes
= $40,000 - $3,060 - $9,000 - $1,000 = $26,940
(b) Salaries and Wages Expense 40,000
FICA Taxes Payable 3,060
Federal Income Taxes Payable 9,000
Managerial accounting provides economic and financial information for internal use by managers. It differs from financial accounting which produces reports for external users. Managerial accounting helps with planning, directing, and controlling a business. It involves tracking costs including direct materials, direct labor, and manufacturing overhead. These costs are either product costs, which are included in inventory, or period costs which are expenses. Managerial accounting also computes cost of goods manufactured using total manufacturing costs for the period plus beginning work in process, less ending work in process.
Chapter 14:
Describe the nature of bonds and indicate the accounting for bond issuances.
Explain the accounting for long-term notes payable.
Explain the accounting for the extinguishment of non-current liabilities.
Indicate how to present and analyze non-current liabilities.
Non-current liabilities (long-term debt) consist of an expected outflow of resources arising from present obligations that are not payable within a year or the operating cycle of the company, whichever is longer.
The document discusses the statement of cash flows, including its usefulness, format, and how to prepare it using the indirect method. It explains that the statement of cash flows provides information about a company's cash receipts and payments during a period and is separated into operating, investing, and financing activities. It also discusses how to classify transactions and adjust net income to reconcile it to net cash provided by operating activities. Key steps include adding back non-cash expenses, and analyzing changes in current assets and liabilities.
This document provides an overview of chapter 16 which covers dilutive securities and earnings per share. It begins with learning objectives that describe how to account for convertible securities, warrants, and share compensation plans. It then discusses the accounting for convertible debt, including how to record the issuance, conversion, and retirement of convertible bonds. The document also describes the accounting for share warrants, share compensation plans, and how to compute basic and diluted earnings per share. Examples are provided to illustrate the accounting entries for these various financial instruments.
The document provides information about adjusting entries for Micro Computer Services for August 2017. It states that accrued revenues of $500 were earned but not recorded for services performed. It also states that accrued expenses of $300 were incurred for unpaid utilities. The adjusting entries would debit Accounts Receivable and credit Service Revenue for $500 to record accrued revenues. For accrued expenses, the adjusting entries would debit Utilities Expense and credit Accounts Payable for $300 to record accrued expenses.
This document discusses fraud and principles of internal control. It begins by introducing the learning objectives which are to discuss fraud and internal control principles, apply them to cash, identify bank account control features, and explain cash reporting. It then defines fraud and lists the three factors that contribute to fraudulent activity. Several principles of internal control are outlined, including establishing responsibility, segregating duties, documentation procedures, physical controls, and independent internal verification. Examples are provided to illustrate how missing specific controls enabled several fraud scenarios.
Here are the steps to solve this payroll problem:
(a) Gross earnings: $40,000
FICA taxes (7.65% of $40,000): 0.0765 * $40,000 = $3,060
Federal income tax withheld: $9,000
State income tax withheld: $1,000
Net pay = Gross earnings - FICA taxes - Federal taxes - State taxes
= $40,000 - $3,060 - $9,000 - $1,000 = $26,940
(b) Salaries and Wages Expense 40,000
FICA Taxes Payable 3,060
Federal Income Taxes Payable 9,000
Managerial accounting provides economic and financial information for internal use by managers. It differs from financial accounting which produces reports for external users. Managerial accounting helps with planning, directing, and controlling a business. It involves tracking costs including direct materials, direct labor, and manufacturing overhead. These costs are either product costs, which are included in inventory, or period costs which are expenses. Managerial accounting also computes cost of goods manufactured using total manufacturing costs for the period plus beginning work in process, less ending work in process.
Chapter 14:
Describe the nature of bonds and indicate the accounting for bond issuances.
Explain the accounting for long-term notes payable.
Explain the accounting for the extinguishment of non-current liabilities.
Indicate how to present and analyze non-current liabilities.
Non-current liabilities (long-term debt) consist of an expected outflow of resources arising from present obligations that are not payable within a year or the operating cycle of the company, whichever is longer.
The document discusses the statement of cash flows, including its usefulness, format, and how to prepare it using the indirect method. It explains that the statement of cash flows provides information about a company's cash receipts and payments during a period and is separated into operating, investing, and financing activities. It also discusses how to classify transactions and adjust net income to reconcile it to net cash provided by operating activities. Key steps include adding back non-cash expenses, and analyzing changes in current assets and liabilities.
This document provides an overview of chapter 16 which covers dilutive securities and earnings per share. It begins with learning objectives that describe how to account for convertible securities, warrants, and share compensation plans. It then discusses the accounting for convertible debt, including how to record the issuance, conversion, and retirement of convertible bonds. The document also describes the accounting for share warrants, share compensation plans, and how to compute basic and diluted earnings per share. Examples are provided to illustrate the accounting entries for these various financial instruments.
The document provides information about adjusting entries for Micro Computer Services for August 2017. It states that accrued revenues of $500 were earned but not recorded for services performed. It also states that accrued expenses of $300 were incurred for unpaid utilities. The adjusting entries would debit Accounts Receivable and credit Service Revenue for $500 to record accrued revenues. For accrued expenses, the adjusting entries would debit Utilities Expense and credit Accounts Payable for $300 to record accrued expenses.
This document discusses key concepts related to analyzing financial statements including horizontal and vertical analysis, ratio analysis, and sustainable income. It defines horizontal analysis as evaluating financial statement data over time to determine increases and decreases. Vertical analysis expresses each financial statement item as a percentage of a base amount. Ratio analysis is used to analyze a company's performance using ratios that measure liquidity, profitability, and solvency. Sustainable income differs from actual net income by excluding unusual revenues, expenses, gains, and losses to determine a company's most likely future income level.
1) The document discusses accounting for merchandising operations under a perpetual inventory system. It describes how purchases, sales, returns and allowances are recorded.
2) Purchases are recorded by debiting inventory and crediting accounts payable. Sales are recorded by crediting sales revenue and debiting cost of goods sold and inventory.
3) Returns and allowances are contra accounts that are credited to offset original debit entries for purchases or sales. This summary highlights the key accounting entries for a merchandising business.
This document discusses accounting for partnerships, including forming, operating, and liquidating a partnership. It covers three main learning objectives:
1) Discussing and accounting for the formation of a partnership by explaining the characteristics of partnerships such as co-ownership, mutual agency, and limited life.
2) Explaining how to account for net income or net loss of a partnership by dividing income according to the partnership agreement using methods like fixed ratios or interest/salaries.
3) Explaining how to account for the liquidation of a partnership through closing entries and distributing remaining assets to partners.
This document discusses current liabilities and contingencies. It begins by defining a liability and current liability. Typical current liabilities include accounts payable, notes payable, current maturities of long-term debt, short-term obligations expected to be refinanced, dividends payable, customer advances and deposits, unearned revenues, sales taxes payable, and income taxes payable. It also identifies types of employee-related liabilities such as payroll deductions, compensated absences, and bonuses. Additionally, the document explains the classification of short-term debt expected to be refinanced and identifies types of gain and loss contingencies. It concludes by indicating how to present and analyze liabilities and contingencies.
This document provides an overview of accounting for receivables. It defines different types of receivables like accounts receivable and notes receivable. It explains how companies recognize, value, and dispose of both accounts receivable and notes receivable. Specific topics covered include recognizing revenue on credit sales, estimating and recording allowance for doubtful accounts, accounting for uncollectible accounts, determining maturity dates and interest on notes, and presenting receivables on financial statements. The document aims to help students understand the key accounting concepts and entries related to receivables.
Describe the environment related to leasing transactions.
Explain the accounting for leases by lessees.
Explain the accounting for leases by lessors.
Discuss the accounting and reporting for special features of lease arrangements.
The document discusses the key characteristics and formation of corporations. It identifies the major characteristics of corporations as separate legal existence, limited liability for stockholders, transferable ownership rights, ability to acquire capital through issuing stock, continuous life regardless of ownership changes, and corporate management structure. It also notes some disadvantages of corporations include additional taxes and government regulations. The document provides details on authorizing stock, issuing stock, and par and no-par values of stock.
This document provides an overview of accounting for liabilities. It begins by defining current liabilities and identifying major types like accounts payable, notes payable, unearned revenue, and accrued expenses. It then discusses accounting for notes payable, including example journal entries. The document also explains accounting for other current liabilities like sales tax payable and unearned revenue. It concludes by covering non-current liabilities such as bonds, including why companies issue bonds, types of bonds, accounting for bond issuances and redemptions, and accounting for long-term notes payable.
The document discusses the steps in preparing a worksheet. It begins by explaining how to prepare a trial balance on the worksheet by transferring account balances from the ledger. The second step is to enter adjusting entries in the adjustments columns. The third step is to complete the adjusted trial balance columns by totaling debits and credits. The fourth step extends adjusted account balances to the appropriate financial statement columns. The final step is to compute net income or loss by totaling the columns and determining the difference between revenues and expenses.
The document discusses accounting for equity. It covers:
1. The key components of equity including contributed capital, retained earnings, and treasury shares.
2. The accounting procedures for issuing shares, whether par value or no-par shares, including allocation of proceeds when shares are issued with other securities.
3. Accounting for shares issued in non-cash transactions, using either the fair value of assets received or shares issued, whichever can be determined more reliably.
This document contains an assignment for an Intermediate Accounting I course. It includes multiple choice questions and exercises analyzing accounting transactions and financial statements.
The questions cover topics such as GAAP, the FASB standard-setting process, elements of financial statements, and accounting assumptions and principles. Correct answers are provided for the multiple choice and transaction analysis questions.
The document provides an overview of key concepts in the first few chapters of an Intermediate Accounting textbook and assesses the student's understanding through questions requiring identification and explanation of accounting standards, transactions, and financial statement elements.
The document provides an overview of accounting information systems. It discusses the basic concepts of an AIS, including that an AIS collects and processes transaction data and communicates financial information. It also describes the nature and purpose of subsidiary ledgers, which are used to track individual account balances like accounts receivable. Additionally, the document explains how to record transactions in special journals, including sales, purchases, cash receipts and payments journals, in order to organize similar transactions and reduce general journal entries. It compares AIS under GAAP and IFRS.
1) The document provides an overview of chapter 1 of the textbook "Financial Accounting" which covers accounting basics. It defines accounting, identifies its users and uses, and explains key concepts like ethics, standards, assumptions and the accounting equation.
2) The accounting equation states that assets must equal liabilities plus equity. It defines the components of the equation as assets being resources owned, liabilities being debts or obligations, and equity being the ownership claim.
3) Business transactions impact the accounting equation by increasing or decreasing at least two elements as a transaction has a dual effect.
Bab 6 - Accounting and the Time Value of Moneymsahuleka
This document discusses accounting topics related to the time value of money, including compound interest, future and present value calculations, annuities, and bond valuation. It provides learning objectives and examples to distinguish between simple and compound interest, use interest tables, solve single-sum and annuity problems, and apply time value of money concepts to accounting measurements.
The document provides answers to questions about accounting for not-for-profit entities such as universities, hospitals, voluntary health and welfare organizations. It addresses topics such as how to account for tuition scholarships, restricted and unrestricted net assets, the accounting standards that apply to public vs. private universities, how to account for restricted contributions, donated services and equipment, and financial statement presentation for various types of not-for-profit organizations.
ch02 - Conceptual Framework for Financial Reporting.pptNicolasErnesto2
The conceptual framework establishes fundamental concepts that guide standard-setting and financial reporting more broadly. It is being jointly developed by the IASB and FASB and consists of three levels: the objective of financial reporting, qualitative characteristics, and specific concepts. The objective is to provide useful information to capital providers. Key qualitative characteristics include relevance and faithful representation. The framework also outlines basic elements, assumptions, principles, and constraints that guide accounting practices. It aims to create consistency and coherence in financial reporting standards over time.
The document discusses the differences between cash flow statements and income statements. Cash flow statements record when cash is received and spent, while income statements record when revenue is earned and expenses are incurred. There can be differences between a company's cash balance and net profit because some transactions only impact one statement. For example, a company can report an increase in net profit but a decrease in cash if it made credit sales or incurred expenses that were not paid in cash.
1. The document discusses process costing, which is used for mass-produced, homogeneous products like cereal, paint, and oil refining. It tracks costs through multiple connected manufacturing processes rather than by individual jobs.
2. A process cost system assigns manufacturing costs of materials, labor, and overhead to work-in-process accounts for each department through journal entries. Completed units are then transferred to the next department or finished goods.
3. Equivalent units are computed to determine the average level of completion for work-in-process and finished units, which is needed to calculate cost per equivalent unit for a production cost report. The weighted-average method is most widely used.
The general partner of Riverside Park Associates LP is Riverside Park
Associates, Inc. The limited partners are individual and institutional investors.
c.
The limited partnership agreement specifies that the general partner is responsible for
managing the day-to-day operations of the partnership and its real estate holdings.
The limited partners have limited liability and do not participate in management.
Profits, losses, cash distributions and liquidation proceeds are allocated 99% to the
limited partners and 1% to the general partner.
d.
The balance sheet shows total assets of $145.4 million as of December 31, 2006.
The largest asset is the $135.4 million net book value of the real
This chapter builds on the concepts of double entry bookkeeping introduced in Chapter 5. It discusses the need to make adjustments to ledger accounts to account for items that relate to the period covered by the financial statements but were not originally recorded in the ledger. These include accruals and prepayments, provisions for bad and doubtful debts, and depreciation. The chapter explains the nature and accounting treatment of these adjustments, including the necessary ledger entries. It concludes by emphasizing the importance of balancing all ledger accounts after making all required adjustments.
This document provides an overview of accounting for liabilities. It begins by listing 7 learning objectives for the chapter, which cover current liabilities, notes payable, other current liabilities, bonds, and financial statement presentation of liabilities. The document then defines current liabilities and notes payable, providing examples of accounting entries. It describes other current liabilities such as accounts payable, unearned revenue, and payroll and taxes. Finally, it discusses types of bonds, how they are issued, and how market value is determined.
This document discusses key concepts related to analyzing financial statements including horizontal and vertical analysis, ratio analysis, and sustainable income. It defines horizontal analysis as evaluating financial statement data over time to determine increases and decreases. Vertical analysis expresses each financial statement item as a percentage of a base amount. Ratio analysis is used to analyze a company's performance using ratios that measure liquidity, profitability, and solvency. Sustainable income differs from actual net income by excluding unusual revenues, expenses, gains, and losses to determine a company's most likely future income level.
1) The document discusses accounting for merchandising operations under a perpetual inventory system. It describes how purchases, sales, returns and allowances are recorded.
2) Purchases are recorded by debiting inventory and crediting accounts payable. Sales are recorded by crediting sales revenue and debiting cost of goods sold and inventory.
3) Returns and allowances are contra accounts that are credited to offset original debit entries for purchases or sales. This summary highlights the key accounting entries for a merchandising business.
This document discusses accounting for partnerships, including forming, operating, and liquidating a partnership. It covers three main learning objectives:
1) Discussing and accounting for the formation of a partnership by explaining the characteristics of partnerships such as co-ownership, mutual agency, and limited life.
2) Explaining how to account for net income or net loss of a partnership by dividing income according to the partnership agreement using methods like fixed ratios or interest/salaries.
3) Explaining how to account for the liquidation of a partnership through closing entries and distributing remaining assets to partners.
This document discusses current liabilities and contingencies. It begins by defining a liability and current liability. Typical current liabilities include accounts payable, notes payable, current maturities of long-term debt, short-term obligations expected to be refinanced, dividends payable, customer advances and deposits, unearned revenues, sales taxes payable, and income taxes payable. It also identifies types of employee-related liabilities such as payroll deductions, compensated absences, and bonuses. Additionally, the document explains the classification of short-term debt expected to be refinanced and identifies types of gain and loss contingencies. It concludes by indicating how to present and analyze liabilities and contingencies.
This document provides an overview of accounting for receivables. It defines different types of receivables like accounts receivable and notes receivable. It explains how companies recognize, value, and dispose of both accounts receivable and notes receivable. Specific topics covered include recognizing revenue on credit sales, estimating and recording allowance for doubtful accounts, accounting for uncollectible accounts, determining maturity dates and interest on notes, and presenting receivables on financial statements. The document aims to help students understand the key accounting concepts and entries related to receivables.
Describe the environment related to leasing transactions.
Explain the accounting for leases by lessees.
Explain the accounting for leases by lessors.
Discuss the accounting and reporting for special features of lease arrangements.
The document discusses the key characteristics and formation of corporations. It identifies the major characteristics of corporations as separate legal existence, limited liability for stockholders, transferable ownership rights, ability to acquire capital through issuing stock, continuous life regardless of ownership changes, and corporate management structure. It also notes some disadvantages of corporations include additional taxes and government regulations. The document provides details on authorizing stock, issuing stock, and par and no-par values of stock.
This document provides an overview of accounting for liabilities. It begins by defining current liabilities and identifying major types like accounts payable, notes payable, unearned revenue, and accrued expenses. It then discusses accounting for notes payable, including example journal entries. The document also explains accounting for other current liabilities like sales tax payable and unearned revenue. It concludes by covering non-current liabilities such as bonds, including why companies issue bonds, types of bonds, accounting for bond issuances and redemptions, and accounting for long-term notes payable.
The document discusses the steps in preparing a worksheet. It begins by explaining how to prepare a trial balance on the worksheet by transferring account balances from the ledger. The second step is to enter adjusting entries in the adjustments columns. The third step is to complete the adjusted trial balance columns by totaling debits and credits. The fourth step extends adjusted account balances to the appropriate financial statement columns. The final step is to compute net income or loss by totaling the columns and determining the difference between revenues and expenses.
The document discusses accounting for equity. It covers:
1. The key components of equity including contributed capital, retained earnings, and treasury shares.
2. The accounting procedures for issuing shares, whether par value or no-par shares, including allocation of proceeds when shares are issued with other securities.
3. Accounting for shares issued in non-cash transactions, using either the fair value of assets received or shares issued, whichever can be determined more reliably.
This document contains an assignment for an Intermediate Accounting I course. It includes multiple choice questions and exercises analyzing accounting transactions and financial statements.
The questions cover topics such as GAAP, the FASB standard-setting process, elements of financial statements, and accounting assumptions and principles. Correct answers are provided for the multiple choice and transaction analysis questions.
The document provides an overview of key concepts in the first few chapters of an Intermediate Accounting textbook and assesses the student's understanding through questions requiring identification and explanation of accounting standards, transactions, and financial statement elements.
The document provides an overview of accounting information systems. It discusses the basic concepts of an AIS, including that an AIS collects and processes transaction data and communicates financial information. It also describes the nature and purpose of subsidiary ledgers, which are used to track individual account balances like accounts receivable. Additionally, the document explains how to record transactions in special journals, including sales, purchases, cash receipts and payments journals, in order to organize similar transactions and reduce general journal entries. It compares AIS under GAAP and IFRS.
1) The document provides an overview of chapter 1 of the textbook "Financial Accounting" which covers accounting basics. It defines accounting, identifies its users and uses, and explains key concepts like ethics, standards, assumptions and the accounting equation.
2) The accounting equation states that assets must equal liabilities plus equity. It defines the components of the equation as assets being resources owned, liabilities being debts or obligations, and equity being the ownership claim.
3) Business transactions impact the accounting equation by increasing or decreasing at least two elements as a transaction has a dual effect.
Bab 6 - Accounting and the Time Value of Moneymsahuleka
This document discusses accounting topics related to the time value of money, including compound interest, future and present value calculations, annuities, and bond valuation. It provides learning objectives and examples to distinguish between simple and compound interest, use interest tables, solve single-sum and annuity problems, and apply time value of money concepts to accounting measurements.
The document provides answers to questions about accounting for not-for-profit entities such as universities, hospitals, voluntary health and welfare organizations. It addresses topics such as how to account for tuition scholarships, restricted and unrestricted net assets, the accounting standards that apply to public vs. private universities, how to account for restricted contributions, donated services and equipment, and financial statement presentation for various types of not-for-profit organizations.
ch02 - Conceptual Framework for Financial Reporting.pptNicolasErnesto2
The conceptual framework establishes fundamental concepts that guide standard-setting and financial reporting more broadly. It is being jointly developed by the IASB and FASB and consists of three levels: the objective of financial reporting, qualitative characteristics, and specific concepts. The objective is to provide useful information to capital providers. Key qualitative characteristics include relevance and faithful representation. The framework also outlines basic elements, assumptions, principles, and constraints that guide accounting practices. It aims to create consistency and coherence in financial reporting standards over time.
The document discusses the differences between cash flow statements and income statements. Cash flow statements record when cash is received and spent, while income statements record when revenue is earned and expenses are incurred. There can be differences between a company's cash balance and net profit because some transactions only impact one statement. For example, a company can report an increase in net profit but a decrease in cash if it made credit sales or incurred expenses that were not paid in cash.
1. The document discusses process costing, which is used for mass-produced, homogeneous products like cereal, paint, and oil refining. It tracks costs through multiple connected manufacturing processes rather than by individual jobs.
2. A process cost system assigns manufacturing costs of materials, labor, and overhead to work-in-process accounts for each department through journal entries. Completed units are then transferred to the next department or finished goods.
3. Equivalent units are computed to determine the average level of completion for work-in-process and finished units, which is needed to calculate cost per equivalent unit for a production cost report. The weighted-average method is most widely used.
The general partner of Riverside Park Associates LP is Riverside Park
Associates, Inc. The limited partners are individual and institutional investors.
c.
The limited partnership agreement specifies that the general partner is responsible for
managing the day-to-day operations of the partnership and its real estate holdings.
The limited partners have limited liability and do not participate in management.
Profits, losses, cash distributions and liquidation proceeds are allocated 99% to the
limited partners and 1% to the general partner.
d.
The balance sheet shows total assets of $145.4 million as of December 31, 2006.
The largest asset is the $135.4 million net book value of the real
This chapter builds on the concepts of double entry bookkeeping introduced in Chapter 5. It discusses the need to make adjustments to ledger accounts to account for items that relate to the period covered by the financial statements but were not originally recorded in the ledger. These include accruals and prepayments, provisions for bad and doubtful debts, and depreciation. The chapter explains the nature and accounting treatment of these adjustments, including the necessary ledger entries. It concludes by emphasizing the importance of balancing all ledger accounts after making all required adjustments.
This document provides an overview of accounting for liabilities. It begins by listing 7 learning objectives for the chapter, which cover current liabilities, notes payable, other current liabilities, bonds, and financial statement presentation of liabilities. The document then defines current liabilities and notes payable, providing examples of accounting entries. It describes other current liabilities such as accounts payable, unearned revenue, and payroll and taxes. Finally, it discusses types of bonds, how they are issued, and how market value is determined.
This chapter discusses various techniques for analyzing financial statements including horizontal analysis, vertical analysis, and ratio analysis. It defines key terms like sustainable income, irregular items, discontinued operations, extraordinary items, and comprehensive income. Irregular items and comprehensive income involve presenting certain gains and losses separately or as direct adjustments to stockholders' equity rather than including them in net income. The chapter provides examples of applying horizontal analysis to compare financial statement line items over time, and vertical analysis to express items as a percentage of a base amount.
This document discusses bank reconciliation statements. It defines a bank reconciliation statement as a schedule that reconciles any differences between the bank balance shown on the bank statement and the cash book. The document outlines reasons for differences between the two balances, including unpresented checks, uncredited deposits, and bank charges. It provides rules for debiting and crediting items in a bank reconciliation statement and steps to prepare the reconciliation, including identifying omitted transactions and adjusting entries to make the balances agree.
This document provides information about economics and accounting coaching classes offered by Khalid Aziz. It lists the subjects covered such as microeconomics, macroeconomics, statistics, financial accounting, and cost accounting. Contact details are provided at the end.
This document discusses the key characteristics and accounting of stockholders' equity. It begins by outlining the learning objectives of understanding corporations, common stock, treasury stock, preferred stock, dividends, retained earnings, and evaluating stockholder performance. It then defines the corporate form of organization and lists its major characteristics including separate legal existence, limited liability, transferable ownership, ability to acquire capital, continuous life, and corporate management. The document proceeds to discuss issuing and recording common stock, considerations for par and no-par value stocks, and reviewing basic concepts.
Akuntansi keuangan menengah II pertemuan 2AmiLaksmi2
The document discusses accounting for plant assets, natural resources, and intangible assets. It covers determining the cost of plant assets, the concept of depreciation, computing depreciation using different methods, revising depreciation, accounting for natural resources and intangible assets, and financial statement presentation of these types of assets. The slides include examples of calculating asset costs and depreciation expense using straight-line, units-of-activity, and declining balance methods.
This document summarizes key concepts related to accounting for long-lived assets. It explains that plant assets should be recorded at cost and depreciated over their useful lives using methods like straight-line or declining-balance. Depreciation is allocated to expense the asset's cost over its useful life. When assets are disposed, any difference between book value and proceeds is recorded as a gain or loss. Ratios can evaluate asset usage. Intangible assets with limited lives are amortized, while those with indefinite lives are not.
The document discusses accounting for plant assets, natural resources, and intangible assets. It describes how to apply the cost principle to plant assets, explains the concept of depreciation and how to compute it using different methods, and how to account for disposals and revaluations of plant assets. It also covers accounting for natural resource depletion and issues related to intangible assets.
This document provides an overview of accounting for plant assets, natural resources, and intangible assets. It covers determining the cost of plant assets, depreciation methods including straight-line, units-of-activity, and declining balance, revising depreciation estimates, distinguishing between capital and expense expenditures, accounting for disposals of plant assets, depletion of natural resources, and issues related to intangible assets. The objectives are presented in 9 points covering these major topics.
Chapter 10 ASSETS NATURAL RESOURCES AND INTANGIBLE ASSETS.pptJemalSeid25
This document provides an overview and learning objectives for Chapter 10 of a financial accounting textbook. The chapter covers accounting for plant assets, natural resources, and intangible assets. It discusses determining the cost of plant assets, different depreciation methods including straight-line and units-of-activity, accounting for expenditures on assets during their useful lives, disposal of assets, depletion of natural resources, and reporting of these asset types.
396
Chapter
Plant Assets, Natural
Resources, and
Intangible Assets
After studying this chapter, you should be
able to:
1 Describe how the cost principle applies
to plant assets.
2 Explain the concept of depreciation.
3 Compute periodic depreciation using
different methods.
4 Describe the procedure for revising
periodic depreciation.
5 Distinguish between revenue and
capital expenditures, and explain the
entries for each.
6 Explain how to account for the disposal
of a plant asset.
7 Compute periodic depletion of natural
resources.
8 Explain the basic issues related to
accounting for intangible assets.
9 Indicate how plant assets, natural
resources, and intangible assets are
reported.
S T U D Y O B J E C T I V E S
Feature Story
The Navigator✓
9
HOW MUCH FOR A RIDE TO THE BEACH?
It’s spring break. Your plane has landed, you’ve finally found your bags, and
you’re dying to hit the beach—but first you need a “vehicular unit” to get
Scan Study Objectives ■
Read Feature Story ■
Read Preview ■
Read text and answer
p. 402 ■ p. 409 ■ p. 412 ■ p. 417 ■
Work Comprehensive p. 421 ■
p. 422 ■
Review Summary of Study Objectives ■
Answer Self-Study Questions ■
Complete Assignments ■
The Navigator✓
Do it!
Do it!
JWCL165_c09_396-443.qxd 8/4/09 9:39 PM Page 396
397
you there. As you turn
away from baggage claim
you see a long row of
rental agency booths.
Many are names you are
familiar with—Hertz, Avis,
and Budget. But a booth
at the far end catches your
eye—Rent-A-Wreck
(www.rent-a-wreck.com).
Now there’s a company
making a clear statement!
Any company that relies
on equipment to generate
revenues must make decisions about what kind of equipment to buy, how
long to keep it, and how vigorously to maintain it. Rent-A-Wreck has decided
to rent used rather than new cars and trucks. It rents these vehicles across
the United States, Europe, and Asia. While the big-name agencies push
vehicles with that “new car smell,” Rent-A-Wreck competes on price. The
message is simple: Rent a used car and save some cash. It’s not a message
that appeals to everyone. If you’re a marketing executive wanting to impress
a big client, you probably don’t want to pull up in a Rent-A-Wreck car. But if
you want to get from point A to point B for the minimum cash per mile, then
they are playing your tune. The company’s message seems to be getting
across to the right clientele. Revenues have increased significantly.
When you rent a car from Rent-A-Wreck, you are renting from an independ-
ent business person who has paid a “franchise fee” for the right to use the
Rent-A-Wreck name. In order to gain a franchise, he or she must meet finan-
cial and other criteria, and must agree to run the rental agency according to
rules prescribed by Rent-A-Wreck. Some of these rules require that each fran-
chise maintain its cars in a reasonable fashion. This ensures that, though you
won’t be cruising down Daytona Beach’s Atlantic Avenue in a Mercedes con-
ver.
The document discusses accounting for property, plant, and equipment (PP&E). It defines PP&E as long-term tangible assets used in operations, including land, buildings, machinery, and equipment. Historical cost is the primary basis for valuing PP&E, which measures the cash paid or equivalent price to bring the asset to the location and condition for its intended use. Costs included in the initial valuation of PP&E comprise all expenditures needed to acquire and prepare the asset, such as purchase price, transportation, installation, and construction costs. The document also covers accounting for self-constructed assets and nonmonetary exchanges of PP&E.
This document provides an overview of accounting for plant assets, natural resources, and intangible assets. It discusses determining the cost of plant assets, the concept of depreciation, and computing depreciation using different methods. The document also addresses accounting for extractable natural resources and intangible assets, as well as presentation and analysis of these items in financial statements. The overall purpose is to explain the basic accounting issues related to plant assets, natural resources, and intangible assets.
Chapter Review10-8dDiscussion Questions
1. O'Neil Office Supplies has a fleet of automobiles and trucks for use by salespersons and for delivery of office supplies and equipment. Collins Auto Sales Co. has automobiles and trucks for sale. Under what caption would the automobiles and trucks be reported in the balance sheet of (a) O'Neil Office Supplies and (b) Collins Auto Sales Co.?
2. Bullwinkle Co. acquired an adjacent vacant lot with the hope of selling it in the future at a gain. The lot is not intended to be used in Bullwinkle business operations. Where should such real estate be listed on the balance sheet?
3. Alpine Company solicited bids from several contractors to construct an addition to its office building. The lowest bid received was for $1,200,000. Alpine decided to construct the addition itself at a cost of $1,100,000. What amount should be recorded in the building account?
4. Keyser Company purchased a machine that has a manufacturer's suggested life of 20 years. The company plans to use the machine on a special project that will last 12 years. At the completion of the project, the machine will be sold. Over how many years should the machine be depreciated?
5. Is it necessary for a business to use the same method of computing depreciation for all classes of its depreciable assets?
6.
1. Under what conditions is the use of the straight-line depreciation method most appropriate?
2. Under what conditions is the use of the units-of-activity depreciation method most appropriate?
3. Under what conditions is the use of the double-declining-balance depreciation method most appropriate?
7. Distinguish between the accounting for capital expenditures and revenue expenditures.
8. Immediately after a used truck is acquired, a new motor is installed at a total cost of $3,850. Is this a capital expenditure or a revenue expenditure?
9. For some of the fixed assets of a business, the balance in Accumulated Depreciation is equal to the cost of the asset. (a) Is it permissible to record additional depreciation on the assets if they are still useful to the business? Explain. (b) When should an entry be made to remove the cost and the accumulated depreciation from the accounts?
10.
1. Over what period of time should the cost of a patent acquired by purchase be amortized?
2. In general, what is the required accounting treatment for research and development costs?
3. How shoul10-8ePractice Exercises
PE 10-1AStraight-line depreciation
1. Obj. 2
Example Exercise 10-1
A building acquired at the beginning of the year at a cost of $1,450,000 has an estimated residual value of $300,000 and an estimated useful life of 10 years. Determine (a) the depreciable cost, (b) the straight-line rate, and (c) the annual straight-line depreciation.
PE 10-1BStraight-line depreciation
1. Obj. 2
Example Exercise 10-1
Equipment acquired at the beginning of the year at a cost of $340,000 has an estimated residual value of $45,000 and an estimated useful life of 10 years. ...
What is 'Property, Plant And Equipment - PP&E'
Property, plant and equipment (PP&E) is a company asset that is vital to business operations but cannot be easily liquidated, and depending on the nature of a company's business, the total value of PP&E can range from very low to extremely high compared to total assets. International accounting standard 16 deals with the accounting treatment of PP&E. It is listed separately in most financial statements because it is treated differently in accounting statements, and improvements, replacements and betterments can pose accounting issues depending on how the costs are recorded.
BREAKING DOWN 'Property, Plant And Equipment - PP&E'
PP&E is also called tangible fixed assets. These assets are physical, tangible assets and they are expected to generate economic benefits for a company for a period of longer than one year. Examples of PP&E include land, buildings and vehicles. Industries or businesses that require a large amount of fixed assets are described as capital intensive.
Financial Statement Record
PP&E is recorded in a company's financial statements in the balance sheet. The cost of PP&E considers the actual cost of purchasing and bringing the asset to its intended use. This cost is called the historical cost. For example, when purchasing a building for a company to run its retail operations, the historical cost could include the purchase price, transaction fees and any improvements made to the building to bring it to its destined use. The value of PP&E is adjusted routinely as fixed assets generally see a decline in value due to use and depreciation. Amortization is used to devalue these assets as they are used, but land is not amortized because it can increase in value. Instead, it is represented at current market value. The balance of the PP&E account is remeasured every reporting period, and, after accounting for historical cost and amortization, is called the book value. This figure is reported on the balance sheet. #ucp
E8-3E8-3 The ledger of Hixson Company at the end of the current ye.docxjacksnathalie
The document provides information about accounting for long-term assets including plant assets, natural resources, and intangible assets. It discusses how to determine the cost of different types of plant assets such as land, land improvements, buildings, and equipment. It also discusses accounting for natural resources and intangible assets. The document contains examples to illustrate accounting entries for plant asset transactions and financial statement presentation of long-term assets.
The document provides information on classifying, measuring, recording, and reporting on long-lived assets including property, plant, and equipment, natural resources, and intangibles. It discusses the different depreciation methods including straight-line, units-of-production, and declining balance. The document also covers asset impairment, disposals of long-lived assets, and international differences between US GAAP and IFRS reporting standards.
This document provides an overview of accounting for long-lived assets including property, plant, and equipment; natural resources; and intangible assets. It discusses classifying these assets, measuring and recording their acquisition costs, applying depreciation methods to allocate costs over time, accounting for asset impairment and disposal, and interpreting a fixed asset turnover ratio. The learning objectives are to define and classify long-lived assets, apply costing and depreciation methods, and analyze asset impairment, disposal and the fixed asset turnover ratio.
ACQUISITION AND DISPOSITION OF PROPERTY, PLANT AND EQUIPMENT.pptJaafar47
The document discusses accounting for property, plant, and equipment. It covers topics such as the costs that should be included in the initial valuation of PP&E like land, buildings, equipment, and self-constructed assets. It also discusses accounting problems related to capitalizing interest costs during construction periods. Specifically, it outlines qualifications for capitalizing interest, how to determine the capitalization period, and how to calculate the amount of interest to capitalize.
The document discusses accounting principles related to plant assets, natural resources, and intangible assets. It covers several topics:
- Plant assets include physical resources used in business operations that are not for sale and have a useful life of multiple years.
- The cost of plant assets includes all expenditures to acquire and prepare the asset for use, such as purchase price, taxes, installation costs.
- Depreciation is the process of allocating the cost of a plant asset over its useful life. Straight-line, units-of-activity, and declining balance are common depreciation methods.
- Factors that determine depreciation expense are cost, salvage value, and useful life estimates. Deprec
Acquisition and disposition of property, plant, and equUmar Gul
The document discusses the accounting treatment for the acquisition and disposition of property, plant, and equipment (PP&E). It covers the initial valuation of PP&E including acquisition costs, self-constructed assets, and interest capitalization. It also discusses subsequent valuation including nonmonetary exchanges, contributions, and accounting for costs and disposals after acquisition.
Similar to Acc102 chap09 publisher_power_point (20)
This document discusses marketing practices and strategies. It covers trends in marketing like outsourcing and globalization. It also discusses organizing a marketing department through functional, geographic, product-based or market-based structures. Finally, it outlines tools for monitoring and improving marketing performance, including annual plans, audits, and reviews of efficiency, profitability and strategy. The overall document provides an overview of holistic marketing organization and best practices.
The document discusses factors companies should consider when deciding to enter global markets and how to manage international operations. It covers evaluating foreign markets, risks of going abroad, modes of entry like exporting and licensing. The text also addresses adapting marketing strategies for other cultures, managing global brands, and organizational structures like export departments and international divisions.
The document discusses the new product development process. It describes the challenges companies face in developing new offerings, such as shortage of ideas, fragmented markets, and faster development times. The document outlines the main stages in new product development, from idea generation to concept testing, prototype testing, and market testing before launch. It also discusses factors that influence consumers' adoption of new products, such as the characteristics of innovations and the categorization of consumers based on their willingness to adopt innovations early or later.
The document discusses various topics related to personal communications and marketing. It covers direct marketing techniques like direct mail, catalogs, and telemarketing. It also discusses interactive marketing using websites, search ads, and display ads. Additionally, it examines the role of word-of-mouth marketing and social media. The document provides guidance on designing a sales force, including considerations around structure, size, and compensation. It also offers tips for salespeople to improve skills like selling, negotiating, and relationship building.
The document discusses developing integrated marketing communication programs. It outlines the steps to developing an advertising program, which are to set objectives, decide on a budget, develop the campaign, decide on media, and make measurement plans. For sales promotions, companies should establish objectives, select appropriate tools, develop the program, pretest it, implement and control it, and evaluate results. When planning brand-building events and experiences, companies should choose appropriate events and design effective programs to measure engagement. Finally, public relations can be used through tools like publications, events, sponsorships, news, and speeches, with objectives, messages, vehicles, implementation, and evaluation guiding PR decisions.
The document discusses marketing communications and integrated marketing communications programs. It covers the major modes of marketing communications including advertising, sales promotion, public relations, direct marketing, and personal selling. It outlines the steps in developing effective communications programs, including identifying the target audience, determining objectives, designing the message strategy and creative appeals, selecting communication channels, establishing a budget, and deciding on the right media mix. Finally, it discusses developing an integrated marketing communications program that coordinates these various communications tools.
The document discusses retailing, wholesaling, and logistics. It covers the major types of retailers like supermarkets, department stores, and discount stores. It also discusses wholesalers, distributors that buy products in bulk and break them down for resale. Logistics involves coordinating the flow of goods from manufacturers to consumers through transportation and warehousing. The document examines the marketing decisions of retailers and wholesalers around areas like pricing, product assortment, and supply chain management. It also looks at trends in these industries and asks about the future of private label brands.
This document discusses marketing channels and channel management. It begins by defining a marketing channel system as the set of organizations involved in making a product available to consumers. It then discusses how companies design channel systems, manage channel members, integrate channels, and address channel conflicts. The document also covers the rise of e-commerce and m-commerce channels and the issues companies face with these new channels.
This document discusses developing pricing strategies and programs. It begins with questions about how consumers evaluate prices and how companies should set and adapt prices. It then covers topics like how the internet has changed pricing, common pricing mistakes, consumer psychology around pricing, estimating costs, competitor price analysis, different pricing methods, selecting a final price, price discounts and changes, and how to respond to competitive pricing changes. The goal is to help companies determine the optimal ways to set, adjust, and maintain prices for their products and services.
The document discusses key aspects of services marketing. It defines a service as any act or performance that is intangible and does not result in ownership. Services are classified along a continuum from pure tangible goods to pure services. Services differ from goods in being intangible, inseparable from their delivery, variable in their delivery, and perishable if not provided immediately. The document outlines challenges in services marketing like matching supply and demand and reducing customer failures. It provides best practices for achieving service excellence, improving quality using models of expected service, and enhancing customer support for goods companies.
The document discusses key concepts around product strategy and marketing, including how products are classified based on durability, tangibility and use. It also covers how companies can differentiate products through features, style and other attributes. Additionally, it examines the importance of product design and how companies manage their product mix through line extensions. The final sections explore co-branding strategies and how packaging, labeling and guarantees are used as marketing tools.
The document discusses competitive dynamics and strategies for different market positions. It addresses how market leaders can expand the total market and defend their share, how challengers can attack leaders, and how followers and nichers can compete. The document also covers strategies for different stages of the product life cycle and how marketers should adapt to economic downturns through focusing on value and customers.
The document discusses brand positioning and differentiation. It defines positioning as how a product is defined by consumers on important attributes compared to competitors or other products. Marketers identify competitors' strengths and weaknesses through customer ratings. Brands can be differentiated through points-of-difference (unique attributes) or points-of-parity (shared attributes). Effective positioning comes from desirable, deliverable, and differentiating attributes. The document also discusses brand mantras, perceptual maps, and emotional branding to convey a brand's identity.
The document discusses branding and brand equity. It defines a brand as a name, symbol or design that identifies a seller's goods and differentiates them from competitors. Brand equity is the added value provided to products and services through branding, which is reflected in how consumers think, feel and act regarding the brand. Building brand equity involves identifying brand positioning, implementing brand marketing, measuring performance, and growing brand value over time. Strong brands provide advantages like greater loyalty and margins as well as marketing effectiveness.
The document discusses market segmentation and targeting. It defines a market segment as a group of customers who share similar needs and wants. It identifies different ways to segment consumer markets, including geographic, demographic, psychographic, and behavioral segmentation. The key requirements for effective segmentation are that the segments are identifiable, substantial, accessible, differentiable, and actionable. Companies must also choose the most attractive target markets to enter.
This document discusses analyzing business markets and organizational buying. It begins by asking chapter review questions about the nature of business markets, buying situations, and the business-to-business buying process. The document then defines organizational buying and discusses the key characteristics of business markets. It also outlines the different types of buying situations and stages in the buying process. Finally, it discusses building relationships with business customers and how institutional and government buyers purchase goods.
The document discusses marketing research and outlines the marketing research process. It describes the key steps as defining the problem, developing a research plan, collecting information, analyzing the information, presenting findings, and making a decision. It also discusses different types of marketing research, metrics for measuring marketing performance, and how marketers can evaluate return on investment from marketing expenditures.
This document discusses collecting marketing information and forecasting demand. It describes a marketing information system as consisting of people, equipment, and procedures to gather, analyze, and distribute timely and accurate information to marketing decision makers. It also discusses internal records, marketing intelligence systems, influential macroenvironment factors, and methods for measuring and forecasting demand such as surveys, sales force opinions, and past sales analysis.
The document defines marketing as an organizational function involving processes for creating, communicating, and delivering value to customers. Marketing management involves choosing target markets and growing customer relationships through superior value. The document outlines fundamental marketing concepts like customer needs and segmentation. It also discusses how marketing has evolved from a production focus to a customer-centric approach involving relationship building and integrated strategies. Successful marketing management requires tasks like developing strategies, understanding customers, building brands, and communicating value.
The document discusses developing marketing strategies and plans. It covers topics such as phases of value creation and delivery, the value chain, core business processes, characteristics of core competencies, holistic marketing, strategic planning processes, SWOT analysis, marketing opportunities analysis, goal formulation, generic strategies, marketing alliances, elements of success, contents of a marketing plan, and evaluating a marketing plan. The key aspects are strategic planning is carried out at different levels of an organization, a marketing plan includes elements like situation analysis, marketing strategy and financial projections, and a marketing plan should be simple, specific, realistic and complete.
🔥🔥🔥🔥🔥🔥🔥🔥🔥
إضغ بين إيديكم من أقوى الملازم التي صممتها
ملزمة تشريح الجهاز الهيكلي (نظري 3)
💀💀💀💀💀💀💀💀💀💀
تتميز هذهِ الملزمة بعِدة مُميزات :
1- مُترجمة ترجمة تُناسب جميع المستويات
2- تحتوي على 78 رسم توضيحي لكل كلمة موجودة بالملزمة (لكل كلمة !!!!)
#فهم_ماكو_درخ
3- دقة الكتابة والصور عالية جداً جداً جداً
4- هُنالك بعض المعلومات تم توضيحها بشكل تفصيلي جداً (تُعتبر لدى الطالب أو الطالبة بإنها معلومات مُبهمة ومع ذلك تم توضيح هذهِ المعلومات المُبهمة بشكل تفصيلي جداً
5- الملزمة تشرح نفسها ب نفسها بس تكلك تعال اقراني
6- تحتوي الملزمة في اول سلايد على خارطة تتضمن جميع تفرُعات معلومات الجهاز الهيكلي المذكورة في هذهِ الملزمة
واخيراً هذهِ الملزمة حلالٌ عليكم وإتمنى منكم إن تدعولي بالخير والصحة والعافية فقط
كل التوفيق زملائي وزميلاتي ، زميلكم محمد الذهبي 💊💊
🔥🔥🔥🔥🔥🔥🔥🔥🔥
A Visual Guide to 1 Samuel | A Tale of Two HeartsSteve Thomason
These slides walk through the story of 1 Samuel. Samuel is the last judge of Israel. The people reject God and want a king. Saul is anointed as the first king, but he is not a good king. David, the shepherd boy is anointed and Saul is envious of him. David shows honor while Saul continues to self destruct.
Beyond Degrees - Empowering the Workforce in the Context of Skills-First.pptxEduSkills OECD
Iván Bornacelly, Policy Analyst at the OECD Centre for Skills, OECD, presents at the webinar 'Tackling job market gaps with a skills-first approach' on 12 June 2024
Philippine Edukasyong Pantahanan at Pangkabuhayan (EPP) CurriculumMJDuyan
(𝐓𝐋𝐄 𝟏𝟎𝟎) (𝐋𝐞𝐬𝐬𝐨𝐧 𝟏)-𝐏𝐫𝐞𝐥𝐢𝐦𝐬
𝐃𝐢𝐬𝐜𝐮𝐬𝐬 𝐭𝐡𝐞 𝐄𝐏𝐏 𝐂𝐮𝐫𝐫𝐢𝐜𝐮𝐥𝐮𝐦 𝐢𝐧 𝐭𝐡𝐞 𝐏𝐡𝐢𝐥𝐢𝐩𝐩𝐢𝐧𝐞𝐬:
- Understand the goals and objectives of the Edukasyong Pantahanan at Pangkabuhayan (EPP) curriculum, recognizing its importance in fostering practical life skills and values among students. Students will also be able to identify the key components and subjects covered, such as agriculture, home economics, industrial arts, and information and communication technology.
𝐄𝐱𝐩𝐥𝐚𝐢𝐧 𝐭𝐡𝐞 𝐍𝐚𝐭𝐮𝐫𝐞 𝐚𝐧𝐝 𝐒𝐜𝐨𝐩𝐞 𝐨𝐟 𝐚𝐧 𝐄𝐧𝐭𝐫𝐞𝐩𝐫𝐞𝐧𝐞𝐮𝐫:
-Define entrepreneurship, distinguishing it from general business activities by emphasizing its focus on innovation, risk-taking, and value creation. Students will describe the characteristics and traits of successful entrepreneurs, including their roles and responsibilities, and discuss the broader economic and social impacts of entrepreneurial activities on both local and global scales.
Andreas Schleicher presents PISA 2022 Volume III - Creative Thinking - 18 Jun...EduSkills OECD
Andreas Schleicher, Director of Education and Skills at the OECD presents at the launch of PISA 2022 Volume III - Creative Minds, Creative Schools on 18 June 2024.
3. 9-3
After studying this chapter, you should be able to:
1. Describe how the historical cost principle applies to plant assets.
2. Explain the concept of depreciation.
3. Compute periodic depreciation using the straight-line method, and contrast
its expense pattern with those of other methods.
4. Describe the procedure for revising periodic depreciation.
5. Explain how to account for the disposal of plant assets.
6. Describe methods for evaluating the use of plant assets.
7. Identify the basic issues related to reporting intangible assets.
8. Indicate how long-lived assets are reported in the financial statements.
Learning ObjectivesLearning ObjectivesLearning ObjectivesLearning Objectives
5. 9-5
Plant AssetsPlant AssetsPlant AssetsPlant Assets
Referred to as property, plant, and equipment; plant and
equipment; and fixed assets.
LO 1 Describe how the historical cost principle applies to plant assets.
physical substance (a definite size and shape),
are used in the operations of a business,
are not intended for sale to customers,
are expected to provide service to the company for a number
of years, except for land.
Plant assets are resources that have
6. 9-6
Plant assets are critical to a company’s success
Plant AssetsPlant AssetsPlant AssetsPlant Assets
Illustration 9-1
LO 1 Describe how the historical cost principle applies to plant assets.
7. 9-7
Historical Cost Principle - requires that companies
record plant assets at cost.
Cost consists of all expenditures necessary to acquire an
asset and make it ready for its intended use.
Determining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant Assets
Revenue expenditure – costs incurred to acquire a plant
asset that are expensed immediately.
Capital expenditures - costs included in a plant asset
account.
LO 1 Describe how the historical cost principle applies to plant assets.
8. 9-8
Determining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant Assets
Cost - cash paid in a cash transaction or the cash equivalent
price paid.
Cash equivalent price is the
fair value of the asset given up or
fair value of the asset received,
whichever is more clearly determinable.
LO 1 Describe how the historical cost principle applies to plant assets.
International Note
IFRS is flexible
regarding asset
valuation.
Companies revalue
to fair value when
they believe this
information is more
relevant.
9. 9-9
All necessary costs incurred in making land ready for its
intended use increase (debit) the Land account.
Land
Determining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant Assets
Costs typically include:
1) cash purchase price,
2) closing costs such as title and attorney’s fees,
3) real estate brokers’ commissions, and
4) accrued property taxes and other liens on the land
assumed by the purchaser.
LO 1 Describe how the historical cost principle applies to plant assets.
10. 9-10
Illustration: Assume that Hayes Manufacturing Company
acquires real estate at a cash cost of $100,000. The property
contains an old warehouse that is razed at a net cost of $6,000
($7,500 in costs less $1,500 proceeds from salvaged materials).
Additional expenditures are the attorney’s fee, $1,000, and the real
estate broker’s commission, $8,000.
Required: Determine the amount to be reported as the cost of the
land.
Determining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant Assets
LO 1 Describe how the historical cost principle applies to plant assets.
11. 9-11
Land
Required: Determine amount to be reported as the cost of the land.
Determining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant Assets
Cash price of property ($100,000)
Net removal cost of warehouse ($6,000)
Attorney's fees ($1,000) 1,000
6,000
$100,000
$115,000Cost of Land
Real estate broker’s commission ($8,000) 8,000
LO 1 Describe how the historical cost principle applies to plant assets.
12. 9-12
Includes all expenditures necessary to make the
improvements ready for their intended use.
Land Improvements
Determining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant Assets
Examples: driveways, parking lots, fences, landscaping,
and underground sprinklers.
Limited useful lives.
Expense (depreciate) the cost of land improvements over
their useful lives.
LO 1 Describe how the historical cost principle applies to plant assets.
13. 9-13
Includes all costs related directly to purchase or construction.
Buildings
Purchase costs:
Purchase price, closing costs (attorney’s fees, title insurance,
etc.) and real estate broker’s commission.
Remodeling and replacing or repairing the roof, floors,
electrical wiring, and plumbing.
Construction costs:
Contract price plus payments for architects’ fees, building
permits, and excavation costs.
Determining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant Assets
LO 1 Describe how the historical cost principle applies to plant assets.
14. 9-14
Include all costs incurred in acquiring the equipment and
preparing it for use.
Costs typically include:
Equipment
Cash purchase price.
Sales taxes.
Freight charges.
Insurance during transit paid by the purchaser.
Expenditures required in assembling, installing, and testing
the unit.
Determining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant Assets
LO 1 Describe how the historical cost principle applies to plant assets.
15. 9-15
Illustration: Lenard Company purchases a delivery truck at a cash
price of $22,000. Related expenditures are sales taxes $1,320,
painting and lettering $500, motor vehicle license $80, and a three-
year accident insurance policy $1,600. Compute the cost of the
delivery truck.
Determining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant Assets
Truck
Cash price
Sales taxes
Painting and lettering 500
1,320
$22,000
$23,820Cost of Delivery Truck
LO 1 Describe how the historical cost principle applies to plant assets.
16. 9-16
Illustration: Lenard Company purchases a delivery truck at a cash
price of $22,000. Related expenditures are sales taxes $1,320,
painting and lettering $500, motor vehicle license $80, and a three-
year accident insurance policy $1,600. Prepare the journal entry
to record these costs.
Determining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant Assets
Equipment 23,820
License expense 80
Prepaid insurance 1,600
Cash 25,500
LO 1 Describe how the historical cost principle applies to plant assets.
17. 9-17
A lease is a contractual agreement in which the owner of an
asset (lessor) allows another party (lessee) to use the asset
for a period of time at an agreed price.
To Buy or Lease?
Some advantages of leasing
1. Reduced risk of obsolescence.
2. Little or no down payment.
3. Shared tax advantages.
4. Assets and liabilities not reported.
Determining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant AssetsDetermining the Cost of Plant Assets
Capital lease - lessees show the asset and liability on the balance sheet.
LO 1 Describe how the historical cost principle applies to plant assets.
19. 9-19
Process of cost allocation, not asset
valuation.
Applies to land improvements, buildings,
and equipment, not land.
Depreciable, because the revenue-
producing ability of asset will decline
over the asset’s useful life.
Process of allocating to expense the cost of a plant asset over
its useful (service) life in a rational and systematic manner.
Accounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant Assets
LO 2 Explain the concept of depreciation.
Depreciation
Helpful Hints
Land does not
depreciate because it
does not wear out.
Depreciation expense is
reported on the income
statement. Accumulated
depreciation is reported
on the balance sheet.
20. 9-20
Factors in Computing Depreciation
Cost
LO 2 Explain the concept of depreciation.
Useful Life Salvage Value
Illustration 9-6
Accounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant Assets
21. 9-21
Management selects the method it believes best measures an
asset’s contribution to revenue over its useful life.
Depreciation Methods
Examples include:
(1) Straight-line method.
(2) Declining-balance method.
(3) Units-of-activity method.
LO 3
Illustration 9-7
Use of depreciation
methods in major U.S.
companies
Accounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant Assets
22. 9-22
Illustration: Bill’s Pizzas purchased a small delivery truck on
January 1, 2012.
Cost $13,000
Expected salvage value $1,000
Estimated useful life (in years) 5
Estimated useful life (in miles) 100,000
Required: Compute depreciation using the following.
(a) Straight-Line. (b) Units-of-Activity. (c) Declining-Balance.
Accounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant Assets
LO 3 Compute periodic depreciation using the straight-line method,
and contrast its expense pattern with those of other methods.
23. 9-23
Straight-Line
Expense is same amount for each year.
Depreciable cost = Cost less salvage value.
Illustration 9-8
Accounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant Assets
LO 3 Compute periodic depreciation using the straight-line method,
and contrast its expense pattern with those of other methods.
24. 9-24
Depreciable Annual Accum. Book
Year Cost x Rate = Expense Deprec. Value
Illustration: (Straight-Line Method)
2014 $ 12,000 20% $ 2,400 $ 2,400 $ 10,600
2015 12,000 20 2,400 4,800 8,200
2016 12,000 20 2,400 7,200 5,800
2017 12,000 20 2,400 9,600 3,400
2018 12,000 20 2,400 12,000 1,000
2014
Journal
Entry
Depreciation expense 2,400
Accumulated depreciation 2,400
Illustration 9-9
LO 3 Compute periodic depreciation using the straight-line method,
and contrast its expense pattern with those of other methods.
Accounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant Assets
25. 9-25
Accounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant Assets
LO 3
Current
Depreciable Annual Partial Year Accum.
Year Cost Rate Expense Year Expense Deprec.
2014 12,000$ x 20% = 2,400$ x 9/12 = 1,800$ 1,800$
2015 12,000 x 20% = 2,400 2,400 4,200
2016 12,000 x 20% = 2,400 2,400 6,600
2017 12,000 x 20% = 2,400 2,400 9,000
2018 12,000 x 20% = 2,400 2,400 11,400
2019 12,000 x 20% = 2,400 x 3/12 = 600 12,000
12,000$
Journal entry:
2014 Depreciation expense 1,800
Accumulated depreciation 1,800
Assume the delivery truck was purchased on April 1, 2014.
Partial
Year
Illustration: (Straight-Line Method)
26. 9-26
Declining-Balance
Accounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant Assets
Accelerated method.
Decreasing annual depreciation expense over the asset’s
useful life.
Double declining-balance rate is double the straight-line
rate.
Rate applied to book value.
LO 3 Compute periodic depreciation using the straight-line method,
and contrast its expense pattern with those of other methods.
27. 9-27
Declining
Beginning Balance Annual Accum. Book
Year Book value x Rate = Expense Deprec. Value
Illustration: (Declining-Balance Method)
2014 13,000 40% $ 5,200 $ 5,200 $ 7,800
2015 7,800 40 3,120 8,320 4,680
2016 4,680 40 1,872 10,192 2,808
2017 2,808 40 1,123 11,315 1,685
2018 1,685 40 685* 12,000 1,000
* Computation of $674 ($1,685 x 40%) is adjusted to $685.
Depreciation expense 5,200
Accumulated depreciation 5,200
2014
Journal
Entry
Illustration 9A-2
LO 3
Accounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant Assets
28. 9-28
Units-of-Activity
Accounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant Assets
LO 3 Compute periodic depreciation using the straight-line method,
and contrast its expense pattern with those of other methods.
Companies estimate total units of activity to calculate
depreciation cost per unit.
Illustration 9A-3
Expense varies based
on units of activity.
Depreciable cost is
cost less salvage
value.
29. 9-29
Hours Rate per Annual Accum. Book
Year Used x Hour = Expense Deprec. Value
Illustration: (Units-of-Activity Method)
2014 15,000 $ 0.12 $ 1,800 $ 1,800 $ 11,200
2015 30,000 0.12 3,600 5,400 7,600
2016 20,000 0.12 2,400 7,800 5,200
2017 25,000 0.12 3,000 10,800 2,200
2018 10,000 0.12 1,200 12,000 1,000
Depreciation expense 1,800
Accumulated depreciation 1,800
2014
Journal
Entry
Illustration 9A-4
LO 3 Compute periodic depreciation using the straight-line method,
and contrast its expense pattern with those of other methods.
Accounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant Assets
30. 9-30
Comparison of
Depreciation
Methods
Illustration 9-12
Illustration 9-13
Accounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant Assets
Each method is
acceptable because
each recognizes the
decline in service
potential of the asset
in a rational and
systematic manner.
LO 3
31. 9-31
IRS does not require taxpayer to use the same depreciation
method on the tax return that is used in preparing financial
statements.
IRS requires the straight-line method or a special accelerated-
depreciation method called the Modified Accelerated Cost
Recovery System (MACRS).
MACRS is NOT acceptable under GAAP.
Depreciation and Income Taxes
Accounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant Assets
LO 3 Compute periodic depreciation using the straight-line method,
and contrast its expense pattern with those of other methods.
32. 9-32
Accounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant Assets
LO 3 Compute periodic depreciation using the straight-line method,
and contrast its expense pattern with those of other methods.
Depreciation Disclosure in the Notes
Illustration 9-14
33. 9-33
Accounted for in the period of change and future periods
(Change in Estimate).
Not handled retrospectively.
Not considered error.
LO 4 Describe the procedure for revising periodic depreciation.
Accounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant Assets
Revising Periodic Depreciation
34. 9-34
Accounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant Assets
Illustration: Arcadia HS, purchased equipment for $510,000
which was estimated to have a useful life of 10 years with a
salvage value of $10,000 at the end of that time. Depreciation has
been recorded for 7 years on a straight-line basis. In 2014 (year 8),
it is determined that the total estimated life should be 15 years with
a salvage value of $5,000 at the end of that time.
No EntryNo Entry
RequiredRequired
LO 4 Describe the procedure for revising periodic depreciation.
Questions:
What is the journal entry to correct the
prior years’ depreciation?
Calculate the depreciation expense for
2014.
35. 9-35
Accounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant Assets
Equipment $510,000
Plant Assets:
Accumulated depreciation 350,000
Net book value (NBV) $160,000
Balance Sheet (Dec. 31, 2013)
Equipment cost $510,000
Salvage value - 10,000
Depreciable base 500,000
Useful life (original) 10 years
Annual depreciation $ 50,000 x 7 years = $350,000
First, establish NBV
at date of change in
estimate.
First, establish NBV
at date of change in
estimate.
LO 4 Describe the procedure for revising periodic depreciation.
After 7 years
36. 9-36
Accounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant Assets
Net book value $160,000
Salvage value (new) 5,000
Depreciable base 155,000
Useful life remaining 8 years
Annual depreciation $ 19,375
Depreciation Expense
calculation for 2014.
Depreciation Expense
calculation for 2014.
Depreciation expense 19,375
Accumulated depreciation 19,375
Journal entry for 2014 and future years.
LO 4 Describe the procedure for revising periodic depreciation.
After 7 years
37. 9-37
Ordinary Repairs - expenditures to maintain the operating
efficiency and productive life of the unit.
Debit - Repair (or Maintenance) Expense.
Additions and Improvements - costs incurred to
increase the operating efficiency, productive capacity, or useful
life of a plant asset.
Debit - the plant asset affected.
Expenditure During Useful Life
Accounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant Assets
LO 4 Describe the procedure for revising periodic depreciation.
39. 9-39
Permanent decline in the fair value of an asset.
So as not to overstate the asset on the books, the company
writes the asset down to its new fair value during the year in
which the decline in value occurs.
Impairments
Accounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant Assets
LO 4 Describe the procedure for revising periodic depreciation.
40. 9-40
Companies dispose of plant assets in three ways —Retirement, Sale,
or Exchange (appendix).
LO 5 Explain how to account for the disposal of a plant asset.
Record depreciation up to the date of disposal.
Eliminate asset by (1) debiting Accumulated Depreciation, and (2)
crediting the asset account.
Illustration 9-16
Plant Asset Disposals
Accounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant AssetsAccounting for Plant Assets
41. 9-41
Sale of Plant Assets
Compare the book value of the asset with the proceeds
received from the sale.
If proceeds exceed the book value, a gain on disposal
occurs.
If proceeds are less than the book value, a loss on disposal
occurs.
Plant Asset DisposalsPlant Asset DisposalsPlant Asset DisposalsPlant Asset Disposals
LO 5 Explain how to account for the disposal of a plant asset.
42. 9-42
Illustration: On July 1, 2014, Wright Company sells office
furniture for $16,000 cash. The office furniture originally cost
$60,000. As of January 1, 2014, it had accumulated depreciation
of $41,000. Depreciation for the first six months of 2014 is $8,000.
Prepare the journal entry to record depreciation expense up to
the date of sale.
LO 5 Explain how to account for the disposal of a plant asset.
Depreciation expense 8,000
Accumulated depreciation 8,000
July 1
Plant Asset DisposalsPlant Asset DisposalsPlant Asset DisposalsPlant Asset Disposals
43. 9-43
Illustration: Wright records the sale as follows.
LO 5 Explain how to account for the disposal of a plant asset.
Cash 16,000
Accumulated depreciation 49,000
Illustration 9-17
Computation of gain
on disposal
Equipment 60,000
Gain on disposal of plant assets 5,000
July 1
Plant Asset DisposalsPlant Asset DisposalsPlant Asset DisposalsPlant Asset Disposals
44. 9-44 LO 5 Explain how to account for the disposal of a plant asset.
Cash 9,000
Accumulated depreciation 49,000
Illustration 9-18
Computation of loss
on disposal
Equipment 60,000
Loss on disposal of plant assets 2,000
July 1
Plant Asset DisposalsPlant Asset DisposalsPlant Asset DisposalsPlant Asset Disposals
Illustration: Assume that instead of selling the office furniture for
$16,000, Wright sells it for $9,000.
45. 9-45
Retirement of Plant Assets
Plant Asset DisposalsPlant Asset DisposalsPlant Asset DisposalsPlant Asset Disposals
LO 5 Explain how to account for the disposal of a plant asset.
No cash is received.
Decrease (debit) Accumulated Depreciation for the
full amount of depreciation taken over the life of the
asset.
Decrease (credit) the asset account for the original
cost of the asset.
46. 9-46
Illustration: Assume that Hobart Enterprises retires
its computer printers, which cost $32,000. The accumulated
depreciation on these printers is $32,000. The journal entry to
record this retirement is?
LO 5 Explain how to account for the disposal of a plant asset.
Accumulated depreciation 32,000
Printing equipment 32,000
Question: What happens if a fully depreciated plant asset is still
useful to the company?
Plant Asset DisposalsPlant Asset DisposalsPlant Asset DisposalsPlant Asset Disposals
47. 9-47
Illustration 9-19
Analyzing Plant AssetsAnalyzing Plant AssetsAnalyzing Plant AssetsAnalyzing Plant Assets
LO 6 Describe methods for evaluating the use of plant assets.
Return on Asset indicates the amount of net income
generated by each dollar of assets.
49. 9-49
Illustration 9-20
Analyzing Plant AssetsAnalyzing Plant AssetsAnalyzing Plant AssetsAnalyzing Plant Assets
LO 6 Describe methods for evaluating the use of plant assets.
Asset Turnover indicates how efficiently a company
uses its assets to generate sales.
50. 9-50
Profit Margin Revisited
Illustration 9-21
Analyzing Plant AssetsAnalyzing Plant AssetsAnalyzing Plant AssetsAnalyzing Plant Assets
LO 6 Describe methods for evaluating the use of plant assets.
Tells how effective a company is in turning its sales into income—
that is, how much income each dollar of sales provides.
Illustration 9-22
You can evaluate
the return on assets
ratio by evaluating
its components.
51. 9-51
Intangible assets are rights, privileges, and competitive
advantages that result from ownership of long-lived assets
that do not possess physical substance.
Intangible AssetsIntangible AssetsIntangible AssetsIntangible Assets
Patents
Copyrights
Franchises or licenses
Trademarks
Trade names
Goodwill
Limited life or an indefinite life.
Common types of intangibles:
LO 7 Identify the basic issues related to reporting intangible assets.
52. 9-52
Accounting for Intangibles
Limited-Life Intangibles:
Amortize to expense.
Credit asset account or accumulated amortization.
Indefinite-Life Intangibles:
No foreseeable limit on time the asset is expected to
provide cash flows.
No amortization.
Intangible AssetsIntangible AssetsIntangible AssetsIntangible Assets
LO 7 Identify the basic issues related to reporting intangible assets.
53. 9-53
Patents
Exclusive right to manufacture, sell, or otherwise control
an invention for a period of 20 years from the date of the
grant.
Capitalize costs of purchasing a patent and amortize
over its 20-year life or its useful life, whichever is shorter.
Expense any R&D costs in developing a patent.
Legal fees incurred successfully defending a patent are
capitalized to Patent account.
Types of Intangible AssetsTypes of Intangible AssetsTypes of Intangible AssetsTypes of Intangible Assets
LO 7 Identify the basic issues related to reporting intangible assets.
54. 9-54
Illustration: National Labs purchases a patent at a cost of $60,000
on June 30. National estimates the useful life of the patent to be
eight years. Prepare the journal entry to record the amortization for
the six-month period ended December 31.
Amortization expense 3,750
Patent 3,750
Cost $60,000
Useful life ÷ 8
Annual expense $ 7,500
6 months x 6/12
Amortization $ 3,750
Dec. 31
LO 7
Types of Intangible AssetsTypes of Intangible AssetsTypes of Intangible AssetsTypes of Intangible Assets
55. 9-55
Expenditures that may lead to
patents,
copyrights,
new processes, and
new products.
All R & D costs
are expensed
when incurred.
Research and Development Costs
LO 7 Identify the basic issues related to reporting intangible assets.
Types of Intangible AssetsTypes of Intangible AssetsTypes of Intangible AssetsTypes of Intangible Assets
Helpful Hint Research and development
costs are not intangible costs, but because
these expenditures may lead to patents
and copyrights, we discuss them in this
section.
56. 9-56
Copyrights
Give the owner the exclusive right to reproduce and sell an
artistic or published work.
Granted for the life of the creator plus 70 years.
Capitalize costs of acquiring and defending it.
Amortized to expense over useful life.
LO 7 Identify the basic issues related to reporting intangible assets.
Types of Intangible AssetsTypes of Intangible AssetsTypes of Intangible AssetsTypes of Intangible Assets
57. 9-57
Trademarks and Trade Names
Word, phrase, jingle, or symbol that identifies a
particular enterprise or product.
► Wheaties, Monopoly, Sunkist, Kleenex, Coca-Cola,
Big Mac, and Jeep.
Legal protection for indefinite number of 20 year
renewal periods.
Capitalize acquisition costs.
No amortization.
LO 7 Identify the basic issues related to reporting intangible assets.
Types of Intangible AssetsTypes of Intangible AssetsTypes of Intangible AssetsTypes of Intangible Assets
58. 9-58
Franchises
Contractual arrangement between a franchisor and a
franchisee.
► Toyota, Shell, Subway, and Marriott are franchises.
Franchise (or license) with a limited life should be
amortized to expense over the life of the franchise.
Franchise with an indefinite life should be carried at cost
and not amortized.
LO 7 Identify the basic issues related to reporting intangible assets.
Types of Intangible AssetsTypes of Intangible AssetsTypes of Intangible AssetsTypes of Intangible Assets
59. 9-59
Goodwill
Includes exceptional management, desirable location, good
customer relations, skilled employees, high-quality products,
etc.
Only recorded when an entire business is purchased.
Goodwill is recorded as the excess of ...
purchase price overover the FMV of the identifiable net assets
acquired.
Internally created goodwill should not be capitalized.
LO 7 Identify the basic issues related to reporting intangible assets.
Types of Intangible AssetsTypes of Intangible AssetsTypes of Intangible AssetsTypes of Intangible Assets
60. 9-60
Match the term most directly associated with each
statement.
Copyright Amortization
Intangible assets Franchise
Research and development costs
1. The allocation to expense of the cost of an intangible
asset over the asset’s useful life.
2. Rights, privileges, and competitive advantages that
result from the ownership of long-lived assets that do
not possess physical substance.
3. An exclusive right granted by the federal government
to reproduce and sell an artistic or published work.
Amortization
Intangible
assets
Copyrights
LO 7 Identify the basic issues related to reporting intangible assets.
61. 9-61
Match the term most directly associated with each
statement.
Copyright Amortization
Intangible assets Franchise
Research and development costs
4. A right to sell certain products or services or to use
certain trademarks or trade names within a
designated geographic area.
5. Costs incurred by a company that often lead to
patents or new products. These costs must be
expensed as incurred.
Franchise
Research and
development
costs
LO 7 Identify the basic issues related to reporting intangible assets.
63. 9-63
Illustration 9-23
Financial Statement PresentationFinancial Statement Presentation
of Long-Lived Assetsof Long-Lived Assets
Financial Statement PresentationFinancial Statement Presentation
of Long-Lived Assetsof Long-Lived Assets
LO 8 Indicate how long-lived assets are reported in the financial statements.
64. 9-64
Appendix 9AAppendix 9AAppendix 9AAppendix 9A
Decreasing annual depreciation expense over the asset’s
useful life.
Double declining-balance rate is double the straight-line
rate.
Rate applied to book value.
Declining-Balance
Illustration 9-A1
LO 9 Compute periodic depreciation using the declining-
balance method and the units-of-activity method.
Calculation of Depreciation
Using Other Methods
65. 9-65
Declining
Beginning Balance Annual Accum. Book
Year Book value x Rate = Expense Deprec. Value
Illustration: (Declining-Balance Method)
2014 13,000 40% $ 5,200 $ 5,200 $ 7,800
2015 7,800 40 3,120 8,320 4,680
2016 4,680 40 1,872 10,192 2,808
2017 2,808 40 1,123 11,315 1,685
2018 1,685 40 685* 12,000 1,000
* Computation of $674 ($1,685 x 40%) is adjusted to $685.
Depreciation expense 5,200
Accumulated depreciation 5,200
2014
Journal
Entry
Illustration 9A-2
LO 9
Appendix 9AAppendix 9AAppendix 9AAppendix 9A Calculation of Depreciation
Using Other Methods
66. 9-66
Appendix 9AAppendix 9AAppendix 9AAppendix 9A
Declining Current
Beginning Balance Annual Partial Year Accum.
Year Book Value Rate Expense Year Expense Deprec.
2014 13,000$ x 40% = 5,200$ x 9/12 = 3,900$ 3,900$
2015 9,100 x 40% = 3,640 3,640 7,540
2016 5,460 x 40% = 2,184 2,184 9,724
2017 3,276 x 40% = 1,310 1,310 11,034
2018 1,966 x 40% = 786 786 11,821
2019 1,179 x 40% = 472 Plug 179 12,000
12,000$
Journal entry:
2014 Depreciation expense 3,900
Accumultated depreciation 3,900
Partial Year
Purchased on
4/1/14
LO 9 Compute periodic depreciation using the declining-
balance method and the units-of-activity method.
Illustration: (Declining-Balance Method)
67. 9-67
Appendix 9AAppendix 9AAppendix 9AAppendix 9A
Suited to equipment whose activity can be measured in units of
output, miles driven, or hours in use.
Units-of-Activity
Illustration 9A-3
LO 9 Compute periodic depreciation using the declining-
balance method and the units-of-activity method.
Calculation of Depreciation
Using Other Methods
Calculate depreciation cost
per unit.
Expense varies based on
units of activity.
Depreciable cost is cost less
salvage value.
68. 9-68
Hours Rate per Annual Accum. Book
Year Used x Hour = Expense Deprec. Value
Illustration: (Units-of-Activity Method)
2014 15,000 $ 0.12 $ 1,800 $ 1,800 $ 11,200
2015 30,000 0.12 3,600 5,400 7,600
2016 20,000 0.12 2,400 7,800 5,200
2017 25,000 0.12 3,000 10,800 2,200
2018 10,000 0.12 1,200 12,000 1,000
Depreciation expense 1,800
Accumulated depreciation 1,800
2014
Journal
Entry
Illustration 9A-4
Appendix 9AAppendix 9AAppendix 9AAppendix 9A Calculation of Depreciation
Using Other Methods
LO 9 Compute periodic depreciation using the declining-
balance method and the units-of-activity method.
69. 9-69
Key Points
The definition for plant assets for both IFRS and GAAP is
essentially the same.
Both IFRS and GAAP follow the historical cost principle when
accounting for property, plant, and equipment at date of acquisition.
Cost consists of all expenditures necessary to acquire the asset and
make it ready for its intended use.
Under both IFRS and GAAP, interest costs incurred during
construction are capitalized. Recently, IFRS converged to GAAP
requirements in this area.
LO 10 Compare the accounting procedures for long-
lived assets under GAAP and IFRS.
70. 9-70
Key Points
IFRS, like GAAP, capitalizes all direct costs in self-constructed
assets such as raw materials and labor. IFRS does not address the
capitalization of fixed overhead, although in practice these costs are
generally capitalized.
IFRS also views depreciation as an allocation of cost over an
asset’s useful life. IFRS permits the same depreciation methods
(e.g., straight-line, accelerated, and units-of-activity) as GAAP.
However, a major difference is that IFRS requires component
depreciation. Component depreciation specifies that any significant
parts of a depreciable asset that have different estimated useful
lives should be separately depreciated. Component depreciation is
allowed under GAAP but is seldom used.
LO 10
71. 9-71
Key Points
IFRS uses the term residual value, rather than salvage value, to
refer to an owner’s estimate of an asset’s value at the end of its
useful life for that owner.
IFRS allows companies to revalue plant assets to fair value at the
reporting date. Companies that choose to use the revaluation
framework must follow revaluation procedures. If revaluation is
used, it must be applied to all assets within the same class. Assets
that are experiencing rapid price changes must be revalued on an
annual basis. Otherwise, less frequent revaluation is acceptable.
LO 10
72. 9-72
Key Points
Under both IFRS and GAAP, changes in the depreciation method
used and changes in useful life are handled in current and future
periods. Prior periods are not affected. GAAP recently conformed to
IFRS in the accounting for changes in depreciation methods.
The accounting for subsequent expenditures, such as ordinary
repairs and additions, are essentially the same under IFRS and
GAAP.
The accounting for plant asset disposals is essentially the same
under IFRS and GAAP.
Initial costs to acquire natural resources are essentially the same
under IFRS and GAAP.
LO 10
73. 9-73
Key Points
The definition of intangible assets is essentially the same under
IFRS and GAAP.
Intangibles generally arise when a company buys another company.
In this case, specific criteria are needed to separate goodwill from
other intangibles. Both IFRS and GAAP follow the same approach
to make this separation; that is, companies recognize an intangible
asset separately from goodwill if the intangible represents
contractual or legal rights or is capable of being separated or
divided and sold, transferred, licensed, rented, or exchanged. In
addition, under both IFRS and GAAP, companies recognize
acquired in-process research and development (IPR&D) as a
separate intangible asset if it meets the definition of an intangible
asset and its fair value can be measured reliably. LO 10
74. 9-74
Key Points
As in GAAP, under IFRS the costs associated with research and
development are segregated into the two components. Costs in the
research phase are always expensed under both IFRS and GAAP.
Under IFRS, however, costs in the development phase are
capitalized as Development Costs once technological feasibility is
achieved.
IFRS permits revaluation of intangible assets (except for goodwill).
GAAP prohibits revaluation of intangible assets.
LO 10
75. 9-75
Key Points
IFRS requires an impairment test at each reporting date for plant
assets and intangibles and records an impairment if the asset’s
carrying amount exceeds its recoverable amount. The recoverable
amount is the higher of the asset’s fair value less costs to sell or its
value-in-use. Value-in-use is the future cash flows to be derived
from the particular asset, discounted to present value. Under GAAP,
impairment loss is measured as the excess of the carrying amount
over the asset’s fair value.
LO 10
76. 9-76
Key Points
IFRS allows reversal of impairment losses when there has been a
change in economic conditions or in the expected use of the asset.
Under GAAP, impairment losses cannot be reversed for assets to
be held and used; the impairment loss results in a new cost basis
for the asset. IFRS and GAAP are similar in the accounting for
impairments of assets held for disposal.
The accounting for exchanges of nonmonetary assets has recently
converged between IFRS and GAAP. GAAP now requires that gains
on exchanges of nonmonetary assets be recognized if the exchange
has commercial substance. This is the same framework used in
IFRS.
LO 10
77. 9-77
Looking to the Future
With respect to revaluations, as part of the conceptual framework project,
the Boards will examine the measurement bases used in accounting. It is
too early to say whether a converged conceptual framework will
recommend fair value measurement (and revaluation accounting) for plant
assets and intangibles. However, this is likely to be one of the more
contentious issues, given the longstanding use of historical cost as a
measurement basis in GAAP. The IASB and FASB have identified a
project that would consider expanded recognition of internally generated
intangible assets. IFRS permits more recognition of intangibles compared
to GAAP. Thus, it will be challenging to develop converged standards for
intangible assets, given the long-standing prohibition on capitalizing
internally generated intangible assets and research and development costs
in GAAP.
LO 10
78. 9-78
IFRS Practice
LO 10 Compare the accounting procedures for long-
lived assets under GAAP and IFRS.
Which of the following statements is correct?
a) Both IFRS and GAAP permit revaluation of property, plant, and
equipment and intangible assets (except for goodwill).
b) IFRS permits revaluation of property, plant, and equipment and
intangible assets (except for goodwill).
c) Both IFRS and GAAP permit revaluation of property, plant, and
equipment but not intangible assets.
d) GAAP permits revaluation of property, plant, and equipment but
not intangible assets.
79. 9-79
IFRS Practice
LO 10 Compare the accounting procedures for long-
lived assets under GAAP and IFRS.
Research and development costs are:
a) expensed under GAAP.
b) expensed under IFRS.
c) expensed under both GAAP and IFRS.
d) None of the above.
80. 9-80
IFRS Practice
LO 10 Compare the accounting procedures for long-
lived assets under GAAP and IFRS.
Under IFRS, value-in-use is defined as:
a) net realizable value.
b) fair value.
c) future cash flows discounted to present value.
d) total future undiscounted cash flows.