Chapter 08 - Chapter 8 Reporting and Interpreting...

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Chapter 8 Reporting and Interpreting Long-lived Assets Acct 2301 Zining Li
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2 Key Terms Tangible and Intangible Assets Book value of long-lived assets Acquisition cost Accumulated depreciation Depreciation, Amortization, and Depletion Disposal of long-term assets
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3 Long-lived Assets Assets that will be used for operations for more than one year Also called long-term assets, or noncurrent assets Tangible and Intangible assets
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4 Tangible Assets Fixed Assets Land Natural Resources Mineral deposits Oil wells Timber tracts
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5 Intangible Assets Assets lack physical substance and confer specific rights on the owner Examples Goodwill (purchased) Trademark (purchased) Copyright Patent Franchise License and operating rights
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6 How to account for purchases of long- lived assets Assets are recorded at acquisition cost on the balance sheet (historical cost principle) Financing charges (interest expense) are excluded from the acquisition cost
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7 Book value of long-lived assets Acquisition cost less the Accumulated Deprecation Also called net book value, or carrying amount of long-lived assets
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8 How is Property, Plant and Equipment reported on the Balance Sheet? $10,000 Less: Accumulated depreciation 4,500 $5,500 Acquisition cost Book value Total cumulative  depreciation charges to date
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9 How to account for Repairs, Maintenance, and Additions Ordinary repairs and maintenance Revenue expenditure Recorded as expense in the income statement Additions and improvement Capital expenditure Increase the book value of assets on the balance sheet. Either increase the cost of the asset, or decrease the accumulated depreciation against the asset
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10 How to account for using long-lived assets Matching principle: part of the acquisition cost must be expensed in periods when revenues are earned. Depreciation
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Chapter 08 - Chapter 8 Reporting and Interpreting...

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