Chapter+9+and+10+Highlights - Chapter 9 study guide Know...

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Chapter 9 study guide Know capital vs. revenue expenditures – why? Impact on accounting equation Depreciation – why? What is matching here? Chapter 9 Highlights Long-term assets Tangible Land – never depreciates! Land improvements Buildings Equipment Intangible Patent Trademark Goodwill - definition What can you do with Fixed Assets? Capital Expenditures? What is a Plant Asset? Buy them Build them Use them – depreciate them Improve them Add to them Repair them**** Sell them Each item on the above list requires ACCOUNTING What is the cost of buying or building an asset? Invoiced amounts Less Discounts (whether or not you take them!!) Plus Taxes Plus Shipping Plus Installation (whatever it takes to get the asset up and running) Plus Extraordinary repairs What doesn’t count? Repairs- repairs are an expense How did you pay for the asset? Notes Payable o Interest Expense/Interest Payable Cash
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Stock Using the Asset o Depreciation o Accounts involved o Accumulated Depreciation (contra asset) o Depreciation Expense (income statement) o How much to depreciate? o Will there be anything left when you are done? Residual value o Estimated useful life How long will the asset be useful to you o Straight-line (used up evenly over the life of the asset) o Cost o Less residual value o = Depreciable Base o divided by Useful Life o Depreciation amount per year Watch dates and adjust accordingly What happens to book value each time depreciation is recorded? What is book value? (Original cost – accumulated depreciation) What about the income statement impact? o
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Chapter+9+and+10+Highlights - Chapter 9 study guide Know...

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