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Plant and intangible assets. (Chapter 9) презентация
Содержание
- 1. Plant and intangible assets. (Chapter 9)
- 2. Plant assets represent a bundle of future
- 3. Major Categories of Plant Assets
- 4. Accountable Events in the Lives of Plant
- 5. Asset price . . . for
- 6. Improvements to land such as driveways, fences,
- 7. Repairs made prior to the building being
- 8. Special Considerations The allocation is based on
- 9. Capital Expenditure Revenue Expenditure Any material expenditure
- 10. The allocation of the cost of a
- 11. Depreciation Book Value Cost – Accumulated Depreciation
- 12. Straight-Line Depreciation
- 13. On January 2, S&G Wholesale Grocery buys
- 14. S&G will record $4,200 depreciation each year
- 15. When an asset is acquired during the
- 16. Half-Year Convention Using the half-year convention, calculate
- 17. Depreciation in the early years of an
- 18. On January 2, S&G buys a new
- 19. Compute depreciation for the rest of the
- 20. Financial Statement Disclosures Estimates of Useful Life
- 21. So depreciation is an estimate. Predicted
- 22. Revising Depreciation Rates On January 1, 2006,
- 23. When our estimates change, depreciation is: Revising Depreciation Rates
- 24. If the cost of an asset cannot
- 25. Update depreciation to the date of
- 26. If Cash > BV, record a
- 27. Assume that a machine costing $10,000,
- 28. Disposal of Plant and Equipment Assume
- 29. Assume that Essex Company exchanges a
- 30. Trading in Used Assets for New Ones
- 31. Noncurrent assets without physical substance. Useful life
- 32. Intangible Assets Patents Copyrights
- 33. Amortization Amortization is the systematic write-off to
- 34. The amount by which the purchase price
- 35. Patents Exclusive right granted by
- 36. Trademarks and Trade Names A
- 37. Franchises Legally protected right to
- 38. Copyrights Exclusive right granted by
- 39. Research and Development Costs All expenditures classified
- 40. Total cost, including exploration and development,
- 41. Depletion is calculated using the units-of-production method.
- 42. Plant Transactions and the Statement of Cash
- 43. End of Chapter 9
Слайд 2Plant assets represent a bundle of future services, and can be
The cost of plant assets is the advance purchase of services.
As years pass, and the services are used, the cost is transferred to depreciation expense.
Plant Assets as a “Stream of Future Services”
Слайд 4Accountable Events in the
Lives of Plant Assets
Acquisition.
Allocation of the acquisition cost
Sale or disposal.
Слайд 5Asset price
. . . for getting the asset to the
. . . for getting the asset ready for use.
Cost
Acquisition of Plant Assets
=
Reasonable and necessary costs . . .
+
Слайд 6Improvements to land such as driveways, fences, and landscaping are recorded
Cost includes real estate commissions, escrow fees, legal fees, clearing and grading the property.
Land Improvements
Land
Special Considerations
Слайд 7Repairs made prior to the building being put in use are
Buildings
Special Considerations
Equipment
Related interest, insurance, and property taxes are treated as expenses of the current period.
Слайд 8Special Considerations
The allocation is based on the relative Fair Market Value
The total cost must be allocated to separate accounts for each asset.
Allocation of a Lump-Sum Purchase
Слайд 9Capital
Expenditure
Revenue
Expenditure
Any material expenditure
that will benefit several
accounting periods.
To capitalize an expenditure
means to
Expenditure for
ordinary repairs
and maintenance.
To expense an expenditure
means to charge it to an
expense account.
Capital Expenditures and Revenue Expenditures
Слайд 10The allocation of the cost of a plant asset to expense
Cost of plant assets
Balance Sheet
Assets:
Plant and
equipment
as the services are received
Depreciation
Слайд 11Depreciation
Book Value
Cost – Accumulated Depreciation
Depreciation
Contra-asset
Represents the portion of an asset’s cost
Causes of Depreciation
Physical deterioration
Obsolescence
Слайд 13On January 2, S&G Wholesale Grocery buys a new delivery truck.
Compute annual depreciation using the straight-line method.
Straight-Line Depreciation
Слайд 14S&G will record $4,200 depreciation each year for five years. Total
Salvage Value
Straight-Line Depreciation
Слайд 15When an asset is acquired during the year, depreciation in the
Half-Year Convention
In the year of acquisition, record six months of depreciation.
½
Depreciation for Fractional Periods
Слайд 16Half-Year Convention
Using the half-year convention, calculate the straight-line depreciation on December
Depreciation = ($75,000 - $5,000) ÷ 10
= $7,000 for a full year
Depreciation = $7,000 × 1/2 = $3,500
Слайд 17Depreciation in the early years of an asset’s estimated useful life
The double-declining balance depreciation rate is 200% of the straight-line depreciation rate of (1÷Useful Life).
Declining-Balance Method
Слайд 18On January 2, S&G buys a new delivery truck paying $24,000
Compute depreciation for the first year using the double-declining balance method.
Declining-Balance Method
Слайд 19Compute depreciation for the rest of the truck’s estimated useful life.
Declining-Balance Method
Total depreciation over the estimated useful life of an asset is the same using either the straight-line method or the declining-balance method.
Слайд 20Financial Statement Disclosures
Estimates of Useful Life and Residual Value
May differ from
The reasonableness of management’s estimates is evaluated by external auditors.
Principle of Consistency
Companies should avoid switching depreciation methods from period to period.
Слайд 21So depreciation
is an estimate.
Predicted
salvage value
Revising Depreciation Rates
Over the
Predicted
useful life
Слайд 22Revising Depreciation Rates
On January 1, 2006, equipment was purchased that cost
Calculate depreciation expense for the year ended December 31, 2009, using the straight-line method.
Слайд 24If the cost of an asset cannot be recovered through future
Impairment of Plant Assets
Слайд 25Update depreciation
to the date of disposal.
Recording cash
received (debit).
Removing accumulated
depreciation (debit).
Removing
Recording a
gain (credit)
or loss (debit).
Disposal of Plant and Equipment
Journalize disposal by:
Слайд 26
If Cash > BV, record a gain (credit).
If Cash < BV,
If Cash = BV, no gain or loss.
Disposal of Plant and Equipment
Recording cash
received (debit).
Removing accumulated
depreciation (debit).
Removing the
asset cost (credit).
Recording a
gain (credit)
or loss (debit).
Слайд 27 Assume that a machine costing $10,000, had accumulated depreciation of
Disposal of Plant and Equipment
Слайд 28Disposal of Plant and Equipment
Assume that a machine costing $10,000,
Слайд 29 Assume that Essex Company exchanges a used earthmover and $35,000
Trading in Used Assets
for New Ones
+ $35,000
Слайд 31Noncurrent assets
without physical
substance.
Useful life is
often difficult
to determine.
Usually acquired
for operational
use.
Often provide
exclusive rights
or privileges.
Intangible Assets
Characteristics
Слайд 32Intangible Assets
Patents
Copyrights
Leaseholds
Leasehold
Improvements
Goodwill
Trademarks and
Trade
Record at current cash equivalent cost, including purchase price, legal fees, and filing fees.
Слайд 33Amortization
Amortization is the systematic write-off to expense of the cost of
Use the straight-line method to amortize most intangible assets.
Слайд 34The amount by which the purchase price exceeds the fair market value of
Occurs when one
company buys
another company.
Only purchased
goodwill is an
intangible asset.
Goodwill
Goodwill is NOT amortized. It is tested annually to determine if there has been an impairment loss.
Слайд 37Franchises
Legally protected right to sell products or provide services
Purchase price is intangible asset which is amortized over the shorter of the protected right or useful life.
Слайд 38Copyrights
Exclusive right granted by the federal government to protect
Amortize cost
over period benefited.
Legal life is
life of creator
plus 70 years.
Слайд 39Research and Development Costs
All expenditures classified as research and development should
All of these R&D costs will really reduce our net income this year!
Слайд 40Total cost,
including
exploration and
development,
is charged to
depletion expense
over periods
benefited.
Examples: oil, coal, gold
Extracted
Natural Resources
Слайд 41Depletion is calculated using the
units-of-production method.
Unit depletion rate is calculated as
Depletion of Natural Resources
Слайд 42Plant Transactions and the
Statement of Cash Flows
Cash payments for plant assets
Depreciation is a non-cash charge to income and has no effect on cash flows.
