ACC 302 PPt 12

ACC 302 PPt 12 - 1 Investments in Noncurrent Operating...

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1 Investments in  Investments in  Noncurrent  Noncurrent  Operating  Operating  Assets-- Assets-- Acquisitions Acquisitions
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2 Identify those costs to be included in the acquisition cost of different types of noncurrent operating assets. Properly account for noncurrent operating asset acquisitions using various special arrangements, including deferred payment, self-construction, and acquisition of an entire company. Learning Objectives
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3 Separate costs into those that should be expensed immediately and those that should be capitalized, and understand the accounting standards for research and development and oil and gas exploration costs. Discuss the pros and cons of recording noncurrent operating assets at their current value. Learning Objectives
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4 Learning Objectives Use the fixed asset turnover ratio as a general measure of how efficiently a company is using its property, plant, and equipment. EXPANDED MATERIAL Evaluate the different ways to compute capitalized interest and properly incorporate midyear loans into the capitalized interest calculations.
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5 Time Line of Business and Accounting Issues Involved With Long-Term Operating Assets
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6 EVALUATE possible acquisition of long-term operating items
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7 ACQUIRE long-term operating assets
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8 DISTINGUISH between those items to be expensed and those to be capitalized
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9 RECORD long-term operating assets at appropriate amount
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10 ESTIMATE and RECOGNIZE periodic depreciation
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11 MONITOR asset value for possible decline
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12 DISPOSE of asset
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13 Valuation at Acquisition Initially record asset at cost; cost is actual cash price . Cost includes all expenditures required to obtain asset and place it in use.
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14 Purchase price, commissions, legal fees, and escrow fees. Clearing and grading costs. Cost of removing unwanted structures. Assessments for water lines, sewers, and roads. Acquisition Costs of Tangible Noncurrent Operating Assets
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15 Landscaping. Parking lots. Interior sidewalks. Light structures (for parking and sidewalks). Fencing. Acquisition Costs of Tangible Noncurrent Operating Assets
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16 Purchase price. Taxes, freight, and insurance during shipping and installation. Special foundations or reinforcing of floors. Installation and testing. Note: Any expenditure incurred in preparing the asset Note: Any expenditure incurred in preparing the asset for its intended use is charged to for its intended use is charged to Equipment. Equipment. Acquisition Costs of Tangible Noncurrent Operating Assets
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17 Purchase price. Commissions, legal fees, escrow fees, survey fees. If ready for use: Contract price. Legal fees If newly constructed by outsider: Acquisition Costs of Tangible Noncurrent Operating Assets If a building is self- constructed, the cost of materials, labor, and overhead establishes the cost of the asset.
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18 Acquisition Costs of Intangible Noncurrent Operating Assets Patent: Purchase price, filing and registry fees, cost
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ACC 302 PPt 12 - 1 Investments in Noncurrent Operating...

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