The book value is not the amount of what the asset is

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truck. The book value is not the amount of what the asset is worth. In the example of the truck, the actual value of the truck could be more or even less than the book value. The book value is what is reported by the company in the company’s financial statements. A fixed asset is held by a company with the intent that the asset will be used to provide goods or services. A fixed asset is not intended to be sold during the normal course of business. A company’s financial statements disclose information about its fixed assets. The fixed assets should be grouped into categories like buildings, vehicles, goodwill, patents, and vehicles. Fixed assets are normally a major percentage of a company’s total assets. This fact makes it important to reflect fixed assets’ value in a company’s financial statements Week 3, DQ2 Why are research and development costs expensed? Is this consistent with how other similar costs are handled? Explain why or why not. Should research and development costs be expensed? Explain why or why not. Research and Development (R&D) is a company’s required effort to create a new product or enhance it. R&D is a way that a company seeks future growth, by developing or enhancing products, thus expanding its operations. On average, a company will spend up to 5% of its total revenue on R&D. R&D costs are expensed as they are incurred. There are two categories of R&D costs that are not expensed, but capitalized. These two categories are: materials and equipment; and intangibles purchased from other companies. These two categories are assets, which are depreciated and expensed as R&D costs. R&D costs that are incurred under a contract for other companies are also capitalized. GAAP requires that R&D costs be expensed. This makes sense, because only an average of 25% of all R&D projects are successful. This indicates that companies need to expense their R&D costs.
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  • Spring '10
  • Rob
  • Depreciation, Generally Accepted Accounting Principles, $50,000, $25,000

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