day 5 fixed asset 2009 spring v5

day 5 fixed asset 2009 spring v5 - FixedAssetMeasurement:

Info iconThis preview shows pages 1–11. Sign up to view the full content.

View Full Document Right Arrow Icon
Fixed Asset Measurement:  Estimation and Allocation Dr. James Gong
Background image of page 1

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

View Full DocumentRight Arrow Icon
Agenda n Cost of fixed asset n Self constructed asset: capitalization of interest n Subsequent costs n In class practice problem: interest capitalization n Asset depreciation n Asset disposition n Asset exchanges n Gain or loss on asset disposition
Background image of page 2
n Definition:  Long-lived assets acquired  for operations not for resale. n Subject to depreciation (except land). n Physical presence (as contrasted to  intangibles). Property, Plant and Equipment
Background image of page 3

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

View Full DocumentRight Arrow Icon
Plant Assets Plant Assets as a Percent of Total Assets 5% 51% 59% 78% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% eBay Wal-Mart Anheuser- Busch McDonald's
Background image of page 4
4 Measurement Principle n Historical cost principle used to value assets at the  date of acquisition. n Cash or cash equivalent price used to carry asset on  books. n Any “normal” or “routine” expenditure to get an asset  in place and functioning is part of the cost 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
5 n Purchase price, closing fee, attorney’s fees. n Cost to demolish existing structure, cleanup. n Proceeds from salvage are an offset to the cost. n Land improvements with an indefinite life. Land improvements with separate lives depreciated  separately. Cost of Land
Background image of page 6
n Cost of buildings n Same rule as before applies:  anything to get  an asset in place and functioning is part of the  cost of the building. n Cost of Equipment n Same rule as before applies:  anything to get  an asset in place and functioning is part of the  cost of the building. n Historical cost = Purchase price + costs to  put into  service Cost of Buildings and Equipment
Background image of page 7

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

View Full DocumentRight Arrow Icon
    On January 1, Matrix, Inc. purchased land and building for  $200,000 cash.  The appraised values are building, $162,500, and  land, $87,500.   How much of the $200,000 purchase price will be allocated to the  building and land accounts? Lump-Sum Asset Purchase The total cost of a combined purchase of land and building is separated on the basis of their relative market values .
Background image of page 8
Appraised % of Purchase Apportioned Asset Value Value Price Cost a b * c b × c Land 87,500 $ 35% × 200,000 $ = 70,000 $ Building 162,500 65% × 200,000 = 130,000 Total 250,000 $ 100% 200,000 $ * $87,500 ÷ $250,000 = 35% $162,500 ÷ $250,000 = 65% 35% × 65% × Lump-Sum Asset Purchase
Background image of page 9

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

View Full DocumentRight Arrow Icon
Self-Constructed Assets n Interest cost is a big issue n Capitalize no interest   n Capitalize actual interest incurred for the asset n Capitalize all interest whether associated with  the self-constructed asset or not.  
Background image of page 10
Image of page 11
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 11/08/2011 for the course ACCY 301 taught by Professor Staff during the Spring '08 term at University of Illinois, Urbana Champaign.

Page1 / 45

day 5 fixed asset 2009 spring v5 - FixedAssetMeasurement:

This preview shows document pages 1 - 11. Sign up to view the full document.

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