lec08 - Chapter 8: Reporting and Interpreting Interpreting...

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Chapter 8: Reporting and Chapter 8: Reporting and Interpreting Interpreting Property, Plant and Equipment; Property, Plant and Equipment; Natural Resources; and Intangibles Natural Resources; and Intangibles ACCT 101, Fall 2010
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Slide 2 Learning Objectives 1. Apply the cost principle to measure the acquisition and maintenance of property, plant, and equipment. 2. Apply various cost allocation methods to estimate depreciation expenses 3. Explain the effect of asset impairment on the financial statements. 4. Analyze the disposal of property, plant, and equipment. 5. Apply measurement and reporting concepts for natural resources and intangible assets.
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Slide 3 Tangible Physical Substance Intangible No Physical Substance Expected to Benefit Future Periods Actively Used in Operations over several years Classifying Long-Lived Assets
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Slide 4 Tangible Physical Substance Intangible No Physical Substance Expected to Benefit Future Periods Actively Used in Operations Classifying Long-Lived Assets Land Assets subject to depreciation Buildings and equipment Furniture and fixtures Natural resource assets subject to depletion Mineral deposits and timber Examples
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Slide 5 Tangible Physical Substance Intangible No Physical Substance Expected to Benefit Future Periods Actively Used in Operations Classifying Long-Lived Assets Value represented by rights that produce benefits Definite life Patents Copyrights Franchises Indefinite life Trademarks Goodwill Examples
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Slide 6 Cathay Pacific Airways
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Slide 7 Cathay Pacific Airways
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Slide 8 Cathay Pacific Airways
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Slide 9 Measuring and Recording Acquisition Cost Acquisition cost is the net cash equivalent amount paid or to be paid for the asset, which 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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Slide 10 Measuring and Recording Acquisition Cost Equipment Purchase price Installation costs Modification to building necessary to install equipment Transportation costs
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Slide 11 On January 1, Southwest Air Lines purchased aircraft for $70,000,000 cash. GENERAL JOURNAL Page 8 Date Description Debit Credit Jan. 1 Flight equipment (+A) 70,000,000 Cash (-A) 70,000,000 Measuring and Recording Acquisition Cost Acquisition for Cash On January 14, Southwest Air Lines purchased aircraft for $1,000,000 cash and a $69,000,000 note payable. Acquisition for Debt GENERAL JOURNAL Page 9 Date Description Debit Credit Jan. 14 Flight equipment (+A) 70,000,000 Cash (-A) 1,000,000 Note payable (+L) 69,000,000
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Slide 12 Acquisition for Noncash Consideration Record at the current market value of the consideration given, or the current market value of the asset acquired, whichever is more clearly evident. On July 7, Southwest gave Boeing 9,000,000 shares of
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This note was uploaded on 07/30/2011 for the course ACT 101 taught by Professor Ben during the Spring '11 term at HKU.

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lec08 - Chapter 8: Reporting and Interpreting Interpreting...

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