2 Accounting for Long term assets

2 Accounting for Long term assets - Accounting for...

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Accounting for Long-Term Assets Dr. Mimi Alciatore
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Dr. Mimi Alciatore 2 Property: Land Used in Operations Plant: Factory, Office Buildings Equipment: Cars, Trucks, Computers, Machinery, Furniture
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Dr. Mimi Alciatore 3 Record at Cost Includes All Costs to Get the Asset Ready for its Intended Use
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Dr. Mimi Alciatore 4 The Cost of a Machine Includes All Costs Purchase Price, Less any Discount Shipping Costs Insurance on Machine while in Transit Taxes Costs of Installing Machine (including trial runs)
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Dr. Mimi Alciatore 5 The Cost of Land Typically Includes Purchase Price Closing Costs , such as Title to the Land, Attorneys’ Fees, and Recording Fees Costs of Grading, Filling, Draining , and Clearing the Land
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Dr. Mimi Alciatore 6 Materials, Labor, and Overhead Costs Incurred During Construction Professional Fees and Building Permits Cost of a Building Includes All Costs Directly Related to Acquisition or Construction
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Dr. Mimi Alciatore 7 Where Would the Costs Go For the Cost of Tearing Down an Old Building To Clear the Way to Build A New Building in Its Place? Question
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Dr. Mimi Alciatore 8 Acquisition Costs of Realty: Land (L) or Land Improvements (LI) ? Installation of Fences Around Property Cost of Land Fill and Clearing Proceeds from Salvage of Demolished Building
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Dr. Mimi Alciatore 9 Acquisition Costs of Realty: Land (L) or Land Improvements (LI) ? Cost of parking lots and driveways Cost of trees and shrubbery (permanent)
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Dr. Mimi Alciatore 10 Capitalizing Versus Expensing Costs After Acquisition “Capitalizing” a Cost Means to Add it to Cost of an Asset Capitalize the Cost if Expect it to Benefit Future Periods (It’s an Asset)
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Dr. Mimi Alciatore 11 Capitalizing Versus Expensing Costs After Acquisition Capitalize the Cost if it Increases: Useful Life of the Asset Productivity of the Asset (production quantity) OR Quality of the Items Produced
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Dr. Mimi Alciatore 12 Capitalizing Versus Expensing Costs Otherwise, It is Recorded as a Repair or Maintenance Expense
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Dr. Mimi Alciatore 13 Depreciation The Allocation of the Cost of a Long-lived Asset to the Periods Benefited from its use (Matching)
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Dr. Mimi Alciatore 14 Depreciate Asset Over Its “Useful Life” Must Estimate Asset’s Economic Life In the Firm It is Not Necessarily the Asset’s Physical Life
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Dr. Mimi Alciatore 15 Depreciation Is a Cost Allocation Method It Is Not an Asset Valuation Method ! PP&E Is Not Valued at Current Market Value
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Dr. Mimi Alciatore 16 Depreciation is a Cost Allocation Method Report PP&E at Net Book Value: Asset’s Cost Less Amount Depreciated To Date (Accumulated Depreciation)
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Dr. Mimi Alciatore 17 Depreciation Methods Assume the following information: Asset Cost $ 65,000 Salvage Value 5,000 Useful Life 5 Years Straight line: 65,000 - 5,000 = $12,000 per year 5
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Dr. Mimi Alciatore
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2 Accounting for Long term assets - Accounting for...

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