FinancialAccounting_LTA_Sept_21

FinancialAccounting_LTA_Sept_21 - ORIE 350 September 21,...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon
    ORIE 350 September 21, 2006 Long Term Assets
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
    Long Term Assets Long term assets have the following characteristics: 1. Useful life of more than one year. 2. Acquired for operation of the business. 3. Are not intended for resale to customers.
Background image of page 2
    Long Term Assets Tangible assets have physical substance. 1. Land 2. Plant, buildings, and equipment (a.k.a., plant assets) 3. Natural resources - timber, ore, oil, gas, and coal
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
    Long Term Assets Intangible assets have no physical substance. - patents, copyrights, goodwill. These intangible assets are often more valuable than the tangible assets. However, they are recorded at cost, not at a higher, “market” value! Most long term assets are used up. They lose value over time. We must recognize this lost value each period as an expense. We allocate this expense to each period over the useful life of the asset.
Background image of page 4
    Long Term Assets The period allocation of expenses for plant, buildings, and equipment is (as we know) called depreciation. Can we depreciate land? No. We can put land improvements in a separate account (called Land Improvements) and depreciate them, though. Typical land improvements are fences, parking lots, driveways, and signs.
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
    Long Term Assets The period allocation of the benefits of natural resources is called depletion. Usually on a per ton mined basis (for ore or coal), on a stumpage or per-tree basis (for pulp wood), on a board-feet basis (for timber), on a per barrel basis (for oil), or on a per million cubic feet basis (for natural gas).
Background image of page 6
    Long Term Assets The period allocation of intangible assets is called amortization. The unexpired part of the cost of an asset is called its book value or carrying value. Ex. For plant assets, Book value = cost – accumulated depreciation.
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
    Deciding whether to acquire long term assets One way is the Net Present Value (NPV) method. 1.
Background image of page 8
Image of page 9
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/05/2009 for the course ORIE 350 taught by Professor Callister during the Summer '08 term at Cornell.

Page1 / 30

FinancialAccounting_LTA_Sept_21 - ORIE 350 September 21,...

This preview shows document pages 1 - 9. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online