chapter 9 syncro

chapter 9 syncro - C h . 9- p . 1 Ch. 9 Synchronotes for...

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Unformatted text preview: C h . 9- p . 1 Ch. 9 Synchronotes for Fundamentals of Financial Accounting, 3e by Phillips/Libby/Libby Chapter 9 Reporting and Interpreting Long-Lived Tangible and Intangible Assets Definition and Classification Actively Used in Operations Will not be used up within the next year Two types: Tangible : Physical Substance Examples: Land Assets subject to depreciation o Buildings and equipment o Furniture and fixtures Intangible : No Physical Substance Value represented by rights that produce benefits. Intangibles with a limited life, such as patents and copyrights, are subject to amortization. Intangibles with an unlimited (or indefinite) life, such as goodwill and trademarks, are not amortized. C h . 9- p . 2 Acquisition of Tangible Assets Acquisition cost includes: 1. purchase price, and 2. all expenditures needed to prepare the asset for its intended use. Recording costs as assets is called capitalizing the costs. Land: Purchase cost Legal fees Surveying fees Brokers commissions Buildings: Purchase/construction cost Legal fees Appraisal fees Architectural fees Equipment: Purchase/construction cost Sales taxes Transportation costs Installation costs C h . 9- p . 2 Appraised % of Purchase Apportioned Asset Value Value Price Cost a b* c b c Land 175,000 $ 35% 400,000 $ = 140,000 $ Building 325,000 65% 400,000 = 260,000 Total 500,000 $ 100% 400,000 $ * $175,000 $500,000 = 35% $325,000 $500,000 = 65% Basket Purchase The total cost of a combined purchase of land and building is allocated in proportion to their relative market values. On January 1, Jones purchased land and building for $400,000 cash. The appraised values are building, $325,000, and land, $175,000. How much of the $400,000 purchase price will be charged to the building and land accounts? Cash Purchase Cedar Fair purchased a new ride for $26,000,000 less a $1,000,000 discount. Cedar Fair paid $125,000 for transportation and $625,000 for installation of the ride. Prepare the journal entry for the acquisition assuming Cedar Fair paid cash for the new ride. Credit Purchase Instead of paying cash, assume that Cedar Fair issued a note for the new ride, but paid cash for the transportation installation of the ride. Prepare the journal entry. C h . 9- p . 2 Maintenance Costs Incurred during Use Depreciation Expense Depreciation is a cost allocation process that matches costs of operational assets with periods benefited by their use. The effects of $130 of depreciation on the accounting equation and the journal entry to record them follow: Depreciation calculations require three amounts for each asset: Type of Accounting Expenditure Identifying Characteristics Treatment Ordinary 1. Maintains normal operating condition Expense repairs and 2. Does not increase productivity maintenance 3. Does not extend life beyond original estimate Extraordinary 1. Major overhauls or partial Capitalize repairs replacements...
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chapter 9 syncro - C h . 9- p . 1 Ch. 9 Synchronotes for...

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