chap008 - ReportingandInterpreting ReportingandInterpreting

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Reporting and Interpreting Reporting and Interpreting Property, Plant and Equipment;  Property, Plant and Equipment;  Natural Resources; and Intangibles Natural Resources; and Intangibles Chapter 8
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8-2 Tangible Physical Substance Intangible No Physical Substance Expected to Benefit Future Periods Actively Used in Operations Classifying Long-Lived Assets Land Buildings and equipment Furniture and fixtures Natural resource assets subject to depletion Mineral deposits and timber Examples Value represented by rights Definite life Patents Copyrights Franchises Indefinite life Trademarks Goodwill Examples
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8-3 Fixed Asset Turnover Fixed Asset Turnover Net Sales Revenue Average Net Fixed Assets = This ratio measures a company’s ability to generate sales given an investment in fixed assets. Southwest Airlines had $9,861 of revenue. End-of-year fixed assets were $10,874 and beginning-of-year fixed assets were $10,094. (All numbers in millions.) Fixed Asset Turnover $9,861 ($10,094 + $10,874) ÷ 2 = = 0.94 Delta Southwest United 1.26 0.94 1.68 2006 Fixed Asset Turnover Comparisons
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8-4 Measuring and Recording Acquisition Cost Acquisition cost includes the purchase price and all expenditures needed to prepare the asset for its intended use. Acquisition cost does not include financing charges and cash discounts . Buildings Purchase price Renovation and repair costs Legal and realty fees Title fees
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8-5 Measuring and Recording Acquisition Cost Equipment Purchase price Installation costs Modification to building necessary to install equipment Transportation costs Land Purchase price Real estate commissions Title insurance premiums Delinquent taxes Surveying fees Title search and transfer fees Land is not depreciable.
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8-6 Acquisition by Construction Asset cost includes: All materials and labor traceable to the construction. A reasonable amount of overhead. Interest on debt incurred during the construction.
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8-7 Repairs, Maintenance, and Additions Type of Capital or Expenditure Revenue Identifying Characteristics Ordinary Revenue 1. Maintains normal operating condition repairs and 2. Does not increase productivity maintenance 3. Does not extend life beyond original estimate Extraordinary
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chap008 - ReportingandInterpreting ReportingandInterpreting

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