acct ch 8 notes

acct ch 8 notes - Reporting and Analyzing Long-Term Assets...

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Reporting and Analyzing Long-Term Assets I. Plant assets A. Tangible, have a physical existence B. Used in operations 1. Not for inventory 2. Determined by intention not type C. Expected to benefit future periods 1. Value decreases as used in production D. Aka property, plant, equipment, fixed assets E. Examples: machines, land, and vehicles II. Acquisition of plant assets A. Cost = invoice price + expenditures incurred to get the asset in place and ready for its intended use + sales tax – discounts B. Negligence costs and fines are not included C. Lump -sum asset 1. Lump sum purchase: the purchase of many assets for one price 2. Determining costs of individual items a) Appraised value of individual asset * purchase price of Total appraised value of lump lump sum b) Called apportioned cost III. Use of plant assets A. Depreciation: process of allocating the cost of a plant asset to expense accounts in the periods that benefit form the asset’s use 1. Balance sheet shows amount of unused asset remains a) Reports book value = original cost – balance in accumulated depreciation b) Each year, book value decreases and accumulated depreciation increases 2. Income statement shows how much of the asset has been used 3. Not a decline in market value B. Recoding depreciation 1. Adjusting entry 2. Debit depreciation expense and credit accumulated depreciation a) Accumulated depreciation is a contra asset account with a normal credit balance
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3. Depreciable cost = cost – salvage value
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acct ch 8 notes - Reporting and Analyzing Long-Term Assets...

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