SSNT10_Oper_Assets - Operational Assets: Acquisition and...

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Operational Assets: Acquisition and Disposition
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Acquisition and Disposition of Operational Assets Acquisition Classification Cost Principle PPE Natural Resources Intangibles Lump-sum purchases Noncash Acquisitions Deferred Payments Stock Issuances Donations Self-constructed assets Dispositions Sale Involuntary conversion Exchanges Utilization Depreciation Change in estimate Change in principle Impairment Maintenance Betterment Errors
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Types of Operational Assets Actively Used in Operations Tangible Property, Plant, Equipment & Natural Resources Intangible No Physical Substance Expected to Benefit Future Periods
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Cost Capitalization General Rule for Cost Capitalization The initial cost of an operational asset includes the purchase price and all expenditures necessary to bring the asset to its desired condition and location for use. Only capitalize direct costs incurred in developing the intangible assets, such as legal costs. Internally Created Intangibles: Generally expensed.
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Costs to be Capitalized Equipment Net purchase price Taxes Transportation costs Installation costs Modification to building necessary to install equipment Testing and trial runs Land (not depreciable) Purchase price Real estate commissions Attorney’s fees Title search Title transfer fees Title insurance premiums Removing old buildings
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Costs to be Capitalized Land Improvements Separately identifiable costs of Driveways Parking lots Fencing Landscaping Private roads Buildings Purchase price Attorney’s fees Commissions Reconditioning
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Costs to be Capitalized (Acquisition Costs of Realty) The following expenditures and receipts are related to land, land improvements, and buildings acquired for use in a business enterprise. Determine how the following should be classified: (a) Money borrowed to pay building contractor (b) Payment for construction from note proceeds (c) Cost of land fill and clearing (d) Delinquent real estate taxes on property assumed (e) Premium on insurance policy during construction (f) Refund of 1-month insurance premium because construction completed early Classification Notes Payable Building Land Land Building (Building)
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Costs to be Capitalized (Acquisition Costs of Realty) The following expenditures and receipts are related to land, land improvements, and buildings acquired for use in a business enterprise. Determine how the following should be classified: (g) Architect’s fee on building $200,000 and building $50,000) (i) Commission fee paid to real estate agency (j) Installation of fences around property (k) Cost of razing and removing building (l) Proceeds (m) Cost of parking lots and driveways (n) Cost of trees and shrubbery (permanent) Costs of:
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Costs to be Capitalized Natural Resources Acquisition costs Exploration costs Development costs Restoration costs The initial cost of an intangible asset includes the purchase price and all other costs necessary to bring it to condition and location for use, such as legal and filing fees.
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This note was uploaded on 07/08/2011 for the course ACG 3482C taught by Professor Tinaker during the Fall '09 term at University of Florida.

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SSNT10_Oper_Assets - Operational Assets: Acquisition and...

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