{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Ch08 - PPE - Chapter 8 Property Plant Equipment Natural...

Info icon This preview shows pages 1–16. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 8 – Property, Plant & Equipment; Natural Resources; and Intangibles Overview Acquisition cost Revenue vs. capital expenditures Depreciation methods Disposal or sale of PPE Natural Resources Intangible assets Asset Impairment 8-1
Image of page 1

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

View Full Document Right Arrow Icon
Definition 8-2 Useful life of more than one year Used in the operation of a business Not intended for resale Examples for Disney?
Image of page 2
Land Assets subject to depreciation Buildings and equipment Furniture and fixtures Natural resource assets subject to depletion Mineral deposits and timber Types of Long-Lived Assets Value represented by rights that produce benefits (e.g. patents) Subject to amortization Tangible Physical Substance Intangible No Physical Substance 8-3
Image of page 3

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

View Full Document Right Arrow Icon
Tangible Assets 8-4
Image of page 4
Acquisition Cost 8-5
Image of page 5

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

View Full Document Right Arrow Icon
Acquisition Cost General 1. Recorded at the cost necessary to acquire the asset and prepare it for its intended use: purchase price sales taxes transportation charges installation costs 2. Acquisition cost does not include financing charges. 8-6
Image of page 6
Acquisition Cost Land Should land be depreciated? 8-7 Price paid for land + Real estate commissions + Closing costs (e.g. attorney’s fees) + Cost of preparing the land for use (e.g. clearing) + Cost of tearing down existing structures = Cost of land
Image of page 7

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

View Full Document Right Arrow Icon
Acquisition Cost Example – Land 8-8 How should the following expenditures that Disney made to build a new ride be classified? Expenditure Amount Land Land Improvements Building Purchase of land 80,000 80,000 Removal of old building 10,000 10,000 Driveway & parking lot 20,000 20,000 Real estate broker's fee 2,000 2,000 Architect's fee - design 5,000 5,000 Title insurance 3,000 3,000 Landscaping (trees, etc.) 4,000 4,000 TOTAL 99,000 20,000 5,000
Image of page 8
Acquisition Cost Buildings – Purchased 8-9 Price paid for building + Closing costs + Costs to update or remodel the facilities (e.g. install shelves) + Any other costs to get the building operational (e.g. repair or replace a roof) = Cost of building
Image of page 9

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

View Full Document Right Arrow Icon
Acquisition Cost Buildings – Constructed 8-10 Architect’s fees + Construction costs (e.g. bricks, labor) + Interest on debt incurred during the construction = Cost of building
Image of page 10
Acquisition Cost Equipment Price paid for equipment + Freight for delivery of equipment + Insurance in transit + Costs to put equipment in service (e.g. testing) = Cost of equipment 8-11
Image of page 11

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

View Full Document Right Arrow Icon
Acquisition Cost Equipment Example On January 1, 2005, Disney incurred the following to purchase a truck: Purchase price $ 11,000 Sales taxes 1,000 Shipping and insurance 400 Painting and lettering 600 $ 13,000 They paid $3,000 cash and signed a note for the remaining balance. Prepare the journal entry to record the purchase. 8-12
Image of page 12
Acquisition Cost Equipment Example 8-13 Prepare the journal entry to record the purchase. Date Description Debit Credit Jan 1 Equipment 13,000 Cash 3,000 Note payable 10,000
Image of page 13

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

View Full Document Right Arrow Icon
Revenue vs. Capital Expenditures 8-14
Image of page 14
Revenue vs. Capital Expenditures Capital Expenditure Debit: asset (Depreciate over time) Revenue Expenditure Debit: expense YES NO Does the expenditure increase capacity/efficiency or extend useful life?
Image of page 15

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

View Full Document Right Arrow Icon
Image of page 16
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern