1 / 21

Long Lived Assets

Long Lived Assets. Types Cost determination Balance sheet presentation Disposal. Types:. Land Buildings and equipment (plant assets) Intangible assets Natural resources. Cost Determination:. Acquisition or production cost plus Costs needed to get asset ready for its intended use

reba
Télécharger la présentation

Long Lived Assets

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Long Lived Assets • Types • Cost determination • Balance sheet presentation • Disposal

  2. Types: • Land • Buildings and equipment (plant assets) • Intangible assets • Natural resources

  3. Cost Determination: • Acquisition or production cost plus • Costs needed to get asset ready for its intended use • Transportation • Installation • Modification

  4. X Co incurred the following cost: equipment price: $10,000; 2% cash discount; Freight in $4,000; installation & testing $2,000; repair of part broken during installation $700. The equipment should be recorded at a cost of • $ 16,500 • $ 15,800 • $ 16,700 • $ 16,000

  5. Cost of Self Constructed Assets • Material • Labor • Overhead • Interest incurred during construction (FAS 34)

  6. Interest Capitalization • Determine applicable interest rate • Determine the weighted average expenditures (WAE) • Determine avoidable interest • Determine actual interest incurred • Capitalize the lower of avoidable or actual interest

  7. Exercise 10-10 • Situation 1- Determine the amount of interest to be capitalized • Situation 3 Determine the amount of interest to be capitalized

  8. Lump Sum purchases Allocate the price paid in relation to the Fair Market Value of each asset. • E 10-13 – the land should be recorded at what cost? • E 10-13 – the building should be recorded at what cost?

  9. Asset acquired for non interest bearing note – MUST be discounted! • E 10 – 14 Determine the cost at which the equipment should be recorded

  10. Balance Sheet Presentation: • Land, Goodwill at historical cost (unless written down for impairment) • All other assets: Book value (BV): • Cost – accumulated depreciation (or amortization or depletion)

  11. Balance Sheet Presentation: • Equipment 100,000 • Less accumulated depreciation (54,000) • Equipment (net) $46,000 • Or: Equipment (net) $46,000 (see note xx)

  12. Disposal (Methods): • Retire (junk) -- always loss • Sell -- gain or loss • Trade in (for similar) -- only loss recognized, otherwise new asset shown at book value of old

  13. Trade (Exchange) • Two part process: • part 1 remove old asset from books • Part 2 record new asset and any gain or loss • NEW RULE (SFAS 153) UP 2-8 in your text book

  14. Non Monetary Exchange with Commercial Substance • That means that there is a change in the company’s expected future cash flows associated with the items exchanged. • You must be told • Cost of New asset is determined as equal to the FMV of asset given up (traded in) plus any cash paid. Gain or loss is recognized

  15. Non Monetary Exchange withoutCommercial Substance • That means that there is NO change in the company’s expected future cash flows associated with the items exchanged. • You must be told • Cost of New asset is determined as equal to the FMV of asset given up (traded in) plus any cash paid. If loss, recognize. Gains are deferred (use book value instead of FMV)

  16. Work UP 10-3 Case a Garrison would record the following • New crane as $198; gain of $18 • New crane as $ 190; gain of 8 • New crane as $ 190; loss of 8 • New crane as $ 190; loss of 18

  17. Work UP 10-3 Case d Garrison would record the following • New crane as $198; gain of $18 • New crane as $ 190; gain of 7 • New crane as $ 183; no gain/loss • New crane as $ 183; loss of 7

  18. Disposal: • Get cost and accumulated depreciation off the books • Determine gain or loss • Gain (Loss): Cash received – Book value (cost – accumulated depreciation)

  19. Disposal: • Example: Cost: 100,000 Accumulated Depreciation 54,000 Book value 46,000 Sold for 38,000 Loss: 8,000

  20. Disposal: • Example (journal entry): Dr. cash 38,000 Dr. accumulated depreciation 54,000 Dr. loss 8,000 Cr. Equipment 100,000

  21. (slide 4) B (slide 7) – 1 $80,000 (slide 7) – 2 $385,000 (slide 8) – 1 $350,000 (slide 8) – 2 $ 1, 050,000 (slide 9) $ 576,765 (slide 16) C (slide 17) C Answers

More Related