Sept 23 - ORIE 350 Long Term Assets A. Long term assets...

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Sept. 23, 2008 Long Term Assets A. 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. B. 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. C. Intangible assets have no physical substance. - patents, copyright, goodwill. D. 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 expense to each period over the useful life of the asset. E. The period allocation of expenses for plant, buildings, and equipment is 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. F. The period allocation of the benefits of natural resources is called depletion. Usually on a per ton mined basis (for ore), 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). G. The period allocation of intangible assets is called amortization. H. The unexpired part of the cost of an asset is called its book value or carrying value. Ex.
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This note was uploaded on 11/07/2008 for the course ORIE 3150 taught by Professor Callister during the Summer '08 term at Cornell University (Engineering School).

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Sept 23 - ORIE 350 Long Term Assets A. Long term assets...

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