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ch8_instructor_sp08 - ACG 2021 Accounting for Decisions...

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1 ACG 2021 Accounting for Decisions Chapter 8: Long-term Assets Yunhao Chen ychen@fiu.edu
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2 What do we hope to learn? How do we classify and report long-term assets? How do we account for the use of these long-term assets? How to we account for the impairment and disposition of long-term assets? What if we change our estimates?
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3 Long-term Assets Long-term assets (“fixed assets”) are operational assets that will be used more than one year . Tangible operational assets (“Property, Plant and Equipment” on Balance Sheet) have physical substance. Land, buildings, fixtures, and equipment Natural resources Intangible operational assets lack physical substance and confer specific use rights on the owner. Franchises, copyright, patents
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4 Purchased operational assets are recorded at cost Cost includes all expenditures necessary to get the asset in place and ready for its intended use. Invoice price, sales taxes, transportation, installation costs… Financing charges are excluded from the acquisition cost (interest expense) The cost of land includes: Acquisition price, real estate commissions, title search, transfer fees, title insurance premiums, delinquent taxes, surveying fees, etc. Land is not depreciated . Acquisition Cost
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5 Depreciation : the systematic allocation of cost to match the expense with revenue generated . Cost of asset on  Balance  Sheet ...as the asset            is used. .... Expense on Income  Statement Depreciation Depletion natural resources Amortization intangible asset
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6 Some thoughts… Depreciation is a process of allocating the cost of an asset to the accounting period which benefit from its use; it’s not a method of valuing assets. Book value (un-depreciated part): original
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This note was uploaded on 04/07/2008 for the course ENG 2021 taught by Professor Yunhaochen during the Spring '08 term at FIU.

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ch8_instructor_sp08 - ACG 2021 Accounting for Decisions...

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