{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# fixed asset - Dr.JamesGong Agenda n Costoffixedasset n n =...

This preview shows pages 1–11. Sign up to view the full content.

Click to edit Master subtitle style Fixed Asset Measurement:  Estimation and Allocation Dr. James Gong

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

View Full Document
Agenda n Cost of fixed asset n Self constructed asset = capitalization of interest n Subsequent costs n In class practice problem: interest capitalization n Asset depreciation n Asset disposition n Asset exchanges n Gain or loss on asset disposition
n Definition: Long-lived assets acquired for  operations, not for resale. n Subject to depreciation (except land). n Physical presence (as opposed to  intangibles). Property, Plant, and Equipment

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

View Full Document
Plant Assets Plant Assets as a Percent of Total Assets 5% 51% 59% 78% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% eBay Wal-Mart Anheuser- Busch McDonald's
4 Measurement Principle n The  historical cost principle  is used to value  assets at the date of acquisition. n Cash or cash equivalent price  used to carry asset on  books. n Any “normal” or “routine” expenditure  to get an asset  in place and functioning is part of the cost of the  asset.

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

View Full Document
How Much to Recognize? n How much does the entrepreneur pay for the new  truck? n Cash paid: \$30,000-2,000-4,500= \$23,500 n Old truck given up:\$ 3,000 n Total: \$26,500
How Much to Recognize? n Assume an entrepreneur operates his business in his  garage. He recently bought a new truck through trade-in  of an old truck. The  list price  of the truck is \$30,000. The  dealer offers \$2,000  discount . The  old  truck is valued at  \$3,000 by the dealer for  trade-in . The entrepreneur gets  voucher  of \$4,500 under the “Cash for Clunkers”  program.  n How much does the entrepreneur  pay  for the new truck?

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

View Full Document
How Much to Recognize? n What is the historical cost of the new truck?  n Current   accounting standards n Historical cost  = assets  given up  to acquire the new truck: n Cash paid : \$30,000-2,000- 4,500 = \$23,500 n Old truck given up: \$ 3,000 n Total:  \$26,500  New truck \$26,500 Cash \$23,500
How Much to Recognize? n What is the historical cost of the new truck?  n Market value (fair value approach) n Historical cost  market value  of the assets acquired:  \$28,000 n Recognize the gain from disposing the old truck n Proceeds: \$4,500 n Old truck given up: \$3,000 n Gain: \$1,500  New truck \$28,000

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

View Full Document
n Purchase price + closing fee + attorney’s fees n Cost to demolish existing structure, cleanup. n Proceeds from salvage are an offset to the cost. n Land improvements with an indefinite life Land improvements with separate lives depreciated  separately. Cost of Land
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 52

fixed asset - Dr.JamesGong Agenda n Costoffixedasset n n =...

This preview shows document pages 1 - 11. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online