UCB+UGBA102A+Topic06+Slides

UCB+UGBA102A+Topic06+Slides - Long-Term Assets UGBA102A...

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
Long-Term Assets UGBA102A Introduction to Financial Accounting
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
UGBA102A Dennis Geyer 2 Definition of Long-Term Asset 1. They are used in the operation of the business. 2. They have a useful life of longer than an operating cycle or one year whichever is longer. 3. They are not intended for sale to customers.
Background image of page 2
UGBA102A Dennis Geyer 3 Types of Long-Term Assets Property, Plant & Equipment Land & Land Improvements Buildings & Building Improvements Machinery & Other Equipment Natural Resources Mineral Deposits Timber Stands Oil Reserves Intangible Assets Patents, Trademarks & Copyrights Franchises, Licenses & Operating Rights Goodwill
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
UGBA102A Dennis Geyer 4 Capital vs. Revenue Expenditure Capital Expenditure increases the productive life, operating efficiency, or capacity of an asset and is recorded as an asset. They include: Additions which are enlargements. Betterments which are improvements. Extraordinary repairs which significantly enhance useful life or residual value. Revenue Expenditure maintains the productive capacity of an asset during the current accounting period only and is recorded as an expense.
Background image of page 4
UGBA102A Dennis Geyer 5 Acquisition Cost The acquisition cost of property, plant and equipment includes all expenditures reasonable and necessary to get an asset in place and ready for use. They may include: Invoice price Freight & insurance in transit Installation & related costs Exception: Acquisition cost does not include interest cost except when incurred during the construction of the asset.
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
UGBA102A Dennis Geyer 6 Acquisition of Plant Assets Acquisition of Plant Assets A company purchased property, including land and buildings, for $238,800. At the time of purchase, the land was appraised at $162,000 and the buildings at $108,000. Asset % Total Value Land 60% Buildings 40% Total 100% Journal entry at acquisition: Apr 22 Land 143,280 $ (a) Buildings 95,520 $ (b) Cash 238,800 $ (a) Land 60% x $238,800 = $143,280 (b) Buildin40% x $238,800 = $ 95,520 Appraised Value 162,000 $ 108,000 $ 270,000 $
Background image of page 6
UGBA102A Dennis Geyer 7 Capitalization of Interest A company is involved with a construction project spent $3,000,000 in labor, materials and other indirect costs. Construction in Progress 31-Dec Buildings under construction 3,000,000 $ Cash 3,000,000 $ Long-term financing was as follows: % Interest Rate Interest Construction loan 5% 50,000 $ Other borrowings 6% 216,000 $ Total long-term debt 266,000 $ Interest Incurred 31-Dec Interest expense 266,000 $ Interest payable 266,000 $ Debt assigned to the construction project was as follows: % Interest Rate Interest Construction loan 5% 50,000 $ Other borrowings 6% 120,000 $ Building und. construction 170,000 $ Interest Capitalized 31-Dec Buildings under construction 170,000 $ Interest expense 170,000 $ 2,000,000 $ 3,000,000 $ Debt Assigned to Building Construction Long-Term Debt Structure Amount 1,000,000 $ Loan Amounts 1,000,000 $ 3,600,000 $ 4,600,000 $
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
UGBA102A Dennis Geyer 8 Uses of Long-Term Assets Asset Asset Cost Allocation Cost Allocation Plant Assets Depreciation Natural Resources Depletion Intangible Assets Amortization
Background image of page 8
UGBA102A Dennis Geyer 9 Depreciation Depreciation refers to the allocation of the cost of a plant asset to the periods that benefit from the cost.
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 27

UCB+UGBA102A+Topic06+Slides - Long-Term Assets UGBA102A...

This preview shows document pages 1 - 10. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online