Handout_07_(APSCW_-_F2009)

Handout_07_(APSCW_-_F2009) - FINANCIALACCOUNTING...

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BUSI W3013 Handout 07 | Page 1 F INANCIAL A CCOUNTING BUSI W3013 | F ALL 2009 H ANDOUT 07 PROFESSOR ANDREW SCHMIDT 1.0 Introduction ……………………………… 1 2.0 Tangible Assets ……………………………… 3 3.0 Intangible Assets ……………………………… 12 4.0 Long Lived Assets and the Statement of Cash Flows ……………………………… 13 5.0. Financial Statement Analysis of Long Lived Assets ……………………………… 16 6.0 Disclosure Requirements ……………………………… 17 7.0 Practice Exercises and Solutions ……………………………… 23 8.0 Problem Set 06 ……………………………… 37 9.0 Appendix ……………………………… 48 H ANDOUT O BJECTIVES : L ONG -L IVED A SSETS (N ONCURRENT A SSETS ) 1) Determine when items should be capitalized as assets or recorded as expenses. 2) Understand depreciation and amortization as a process of cost allocation, not valuation. 3) Compute depreciation under different depreciation methods. 4) Explain the accounting issues related to asset impairments and dispositions 1.0. I NTRODUCTION Assets are economic resources that Represent probable future economic benefits The future benefits can be measured with reasonable precision, and The resources were obtained or are controlled by the accounting entity as a result of a past transaction or event. Long-lived assets are assets that are expected to provide benefits over several years, that is, all assets other than current assets. Long-lived assets include the following categories: Investments Tangible assets (PP&E) Intangible assets Other assets
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BUSI W3013 Handout 07 | Page 2 Investments are long-lived assets that are not used in operations. This asset category includes primarily investments in securities, which we will discuss later during the course. Investments in non-operating assets other than securities (e.g., loans to employees and affiliated companies, land and other assets held for reasons other than use in operations) are generally reported on the balance sheet at historical cost. Tangible assets (Property, Plant and Equipment, PP&E) are long-lived assets that provide the firm with operating capacity and have physical substance (e.g., buildings, equipment and furniture, land for plant site). Intangible assets are long-lived non-physical assets that provide the firm with operating capacity. Intangible assets include goodwill, brand names, patents, trademarks, franchises, computer software, copyrights, permits, licenses, and other contractual rights. Other assets include primarily deferred or prepaid costs that are expected to provide benefits over several accounting periods (e.g., rent, insurance, taxes, and deferred compensation). Deferred/prepaid costs appear on the balance sheet at acquisition cost adjusted downward to reflect the services that have already been consumed (that is, acquisition cost multiplied by the ratio of remaining benefits period to original benefits period). “Other assets” are often reported on the balance sheet combined with intangible assets.
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This note was uploaded on 02/27/2011 for the course BUSINESS 101 taught by Professor S during the Spring '10 term at Columbia College.

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Handout_07_(APSCW_-_F2009) - FINANCIALACCOUNTING...

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