Phillips Chap 9 class slides

Phillips Chap 9 class slides - 9-1Reporting and...

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Unformatted text preview: 9-1Reporting and InterpretingLong-Lived Tangible and Intangible AssetsTangiblePhysicalSubstanceIntangibleNo PhysicalSubstanceWill not be used up within the next yearActively Used in Operations Defining/ClassifyingLong-Lived AssetsLand Assets subject to depreciationBuildings and equipmentFurniture and fixtures ExamplesTangible Assets Value represented by rights that produce benefits.Intangibles with a limited life, such as patents and copyrights, are subject to amortization.Intangibles with an unlimited (or indefinite)life, such as goodwill and trademarks, are notamortized.Intangible AssetsAcquisition cost includes the purchase price and all expenditures needed to prepare the asset for its intended use.Acquisition cost does notincludefinancing charges.Recording costs as assets is calledCapitalizingthe costs.Purchase priceConstruction costsLegal feesAppraisal feesArchitectural fees Buildings Acquisition CostPurchase priceSales taxesTransportation costsInstallation costsEquipment Acquisition CostPurchase priceLegal feesSurveying feesBrokers CommissionsLand is not depreciable.Land Acquisition CostDebitCreditRides and equipment (+A)25,750,000Cash (-A)750,000Note payable (+L)25,000,000Accounts$26,000,000 - $1,000,000 + $125,000 + $625,000Cedar Fair purchased on credit a new ride for $26,000,000 less a $1,000,000 discount. Cedar Fair paid $125,000 cash for transportation and $625,000 cash for installation of the ride.Prepare the journal entry for the acquisition assuming Cedar Fair issued a Note Payable for the new ride.On January 1, Jones purchased land and building for $400,000 cash. Appraised Values Building => $325,000; Land => $175,000. How much of the Purchase Price is allocated to the Building and Land accounts?The total cost of a combined purchase of land and building is allocated in proportion to their relative market values.Acquisition Cost Basket PurchaseAppraised % of Purchase ApportionedAsset Value Value Price Costab*c b cLand = -$ Building = -Total -$ -$ Acquisition Cost Basket PurchaseAppraised % of Purchase ApportionedAsset Value Value Price Costab*c b cLand 175,000$ 35% 400,000$ = 140,000$ Building 325,00065% 400,000= 260,000Total 500,000$ 100% 400,000$ *$175,000 $500,000 = 35%$325,000 $500,000 = 65%Acquisition Cost Basket PurchaseSelf- Constructed Tangible AssetsAsset cost includes:All materials and labor traceable tothe constructionA reasonable amount of overheadInterest on Debt incurred during constructionType of AccountingExpenditure Identifying Characteristics TreatmentOrdinary 1. Maintains normal operating condition Expenserepairs and 2. Does not increase productivitymaintenance 3. Does not extend life beyond originalestimateExtraordinary1. Major overhauls or partial Capitalizerepairs replacements2. Extends life beyond original estimateAdditions 1. Increases productivity Capitalize2. May extend useful life3. Improvements or expansionsDepreciation is a cost allocation...
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Phillips Chap 9 class slides - 9-1Reporting and...

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