DPM_3e_ch08_2003_041911

DPM_3e_ch08_2003_041911 - FINANCIAL ACCOUNTING Third...

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©Cambridge Business Publishers, 2011 Prepared by Diane Tanner Thomas R. Dyckman ■ Robert P. Magee ■ Glenn M. Pfeiffer Third Edition Chapter 8 Chapter 8 Reporting and Analyzing Reporting and Analyzing Long-Term Operating Long-Term Operating Assets Assets FINANCIAL ACCOUNTING
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©Cambridge Business Publishers, 2011 2 Learning Objective 1 Learning Objective 1 Describe and distinguish between Describe and distinguish between tangible and intangible assets. tangible and intangible assets.
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©Cambridge Business Publishers, 2011 3 Long-Term Operating Assets Long-Term Operating Assets Have two common characteristics Acquired for the purpose of producing and delivering products and services that generate revenues Help produce revenues for multiple periods
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©Cambridge Business Publishers, 2011 4 Long-Term Operating Assets Long-Term Operating Assets Tangible Assets Have physical substance Usually include land, buildings, machinery, fixtures and equipment Intangible Assets Have no physical substance Provide the owner with specific rights and privileges Include trademarks, patents, copyrights © ®
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©Cambridge Business Publishers, 2011 5 BJ’s Operating Assets BJ’s Operating Assets BJ’s Wholesale Club, Inc. reports its operating assets in 3 categories in the property, plant, and equipment section of its 2010 and 2009 balance sheets: Assets (in thousands) January 30, 2010 January 31, 2009 Property at cost: Land and buildings $ 694,136 $ 684,807 Leasehold costs and improvements 229,915 220,073 Furniture, fixtures and equipment 599,949 544,744 Total cost 1,524,000 1,449,624 Less: accumulated depreciation and amortization 562,159 535,046 Net, property, plant, and equipment $ 961,841 $ 914,578 Book value
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©Cambridge Business Publishers, 2011 6 Learning Objective 2 Learning Objective 2 Determine which costs to Determine which costs to capitalize and report as assets capitalize and report as assets and which costs to expense. and which costs to expense.
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©Cambridge Business Publishers, 2011 7 Capitalized Costs Capitalized Costs Reported as assets on the balance sheet Called capital expenditures Must include all costs necessary to acquire an asset and prepare it for its intended use Includes Installation costs Taxes Shipping costs Legal fees Setup and calibration costs
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©Cambridge Business Publishers, 2011 8 Capital Expenditure Characteristics Capital Expenditure Characteristics Characteristics that expenditures must possess to be Characteristics that expenditures must possess to be capitalized: capitalized: 1. 1. The asset must be owned or controlled by the The asset must be owned or controlled by the company company 2. 2. The asset must be expected to provide future The asset must be expected to provide future benefits benefits Must be directly linked to future benefits Capitalized costs cannot exceed the expected future benefits to be derived from the use of the asset.
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©Cambridge Business Publishers, 2011 9 Constructed Assets Constructed Assets When assets are constructed by a company for its own use, capitalized costs should include
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