Chapter 9 - Study Objectives Chapter 9 Cost of PPE...

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8/15/2011 1 Reporting and Analyzing Long Long-Lived Assets Lived Assets Chapter 9 Study Objectives Cost of PPE • Depreciation – Straight-line – Diminishing balance – Units-of-production • Disposal Intangible assets and goodwill Chapter 9 2 Study Objectives Long-live assets on the balance sheet Evaluating the use of assets Chapter 9 3 Property, Plant, and Equipment Long-lived resources that: – Have physical substance – Are used in the operation of a business – Are not intended for sale to customers Chapter 9 4 Property, Plant, and Equipment Record at cost — cost principle Cost consists of all expenditures necessary to acquire asset and make it ready for its intended use. Chapter 9 5 Asset Retirement Costs In some companies there are significant costs associated with retiring a long-lived asset (e.g. decommissioning a nuclear power plant) These costs are estimated in advance and included as part of the cost of the asset Chapter 9 6
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8/15/2011 2 Land Cost of land includes – Purchase price – Closing costs such as title and legal fees Chapter 9 7 Note: Do not depreciate land since its useful life is indefinite. In addition, its usefulness and revenue producing ability generally remain intact, or increase.
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