Chapter 7 - Chapter 7: Plant Assets & Intangibles Dr. Ron...

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Chapter 6 Page 1 Chapter 7: Plant Dr. Ron Lazer Sixth Quiz s Date: To be announced in class s Content: Chapter 7 (specific instructions will be provided during class) Ron Lazer, Ph.D.
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Chapter 6 Page 2 Financial Accounting GAAP The Accounting Information System Financial Statements Balance Sheet Income Statement Ron Lazer, Ph.D. Long-Lived Assets Depreciation Exp., Gains / Losses Chapter 7’s Objectives s b Costs to Capitalize b Post-acquisition Expenditures (Capital Expenditure vs. Immediate Expense) b Depreciation b Disposal s Natural Resources b Depletion s Intangible Assets b Amortization b Impairment Ron Lazer, Ph.D.
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Chapter 6 Page 3 Overview of Long-Lived Assets s Long-lived assets - resources that are held for an extended time, such as land, buildings, equipment, natural resources, and patents b These assets help produce revenues over many periods by facilitating the production and sale of goods or services to customers. Ron Lazer, Ph.D. Overview of Long-Lived Assets s Tangible assets - physical items that can be seen and touched, such as land, natural resources, buildings, and equipment b Also known as fixed assets or plant assets s Intangible assets - rights or economic benefits, such as franchises, patents, trademarks, copyrights, and goodwill that are not physical in nature Ron Lazer, Ph.D.
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Chapter 6 Page 4 Overview of Long-Lived Assets s Terms for allocation of costs over time: b Depreciation - allocation of the cost of tangible assets to the periods in which the assets are used b Amortization - allocation of the cost of intangible assets to the periods that benefit from these assets b Depletion - allocation of the cost of natural resources to the periods in which the resources are used s Land is not depreciated because it does not wear out or become obsolete. Ron Lazer, Ph.D. 1. What costs to capitalize? Overview of Accounting for Property, Plant and Equipment Acquisition 2. Depreciation 3.Postacquisition expenditures 4. Retirement or Sale Use Disposal
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Chapter 6 Page 5 Acquisition: What Costs to Capitalize? s General Rule: b Capitalize (add to an asset account) the costs to acquire the asset and to prepare it for its intended use. s Note: for all acquisitions, part of the cost is the purchase price, specifically the “ cash equivalent purchase price (the amount we would pay if we paid cash). This excludes any cost of financing the purchase (interest expense). What Costs to Capitalize? s Land b purchase price, clearing costs, brokerage commissions, survey costs, legal fees, back taxes, closing costs, some landscaping (only if permanent in nature). s Land improvements b purchase price, some landscaping (temporary), parking lots, sidewalks, fencing, etc. s
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This note was uploaded on 01/09/2010 for the course ACCT 2331 taught by Professor Staff during the Fall '08 term at University of Houston.

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Chapter 7 - Chapter 7: Plant Assets & Intangibles Dr. Ron...

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