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Accounting Assets. Chapter 10: Long-Term Assets L01 Types of Long-Term Assets
and Issues Related to Accounting for them ? Long-Term ...
... 3. Fixed-asset accounting- Assets such as land, buildings, equipment, etc.
that are recorded in an account on the balance sheet. ...
... objects that retin their size and shape but lose their economic usefulness over
time (eg truck) Accounting principles: Cost principle: Assets should be ...
... 4. $650 expenses (liabilities) 5. Distributions to owners $25 (liability) Accounting
equation is assets = liabilities + owner equity 1. Assets = Liabilities ...
... Under US Generally Accepted Accounting Principles (US GAAP), the historical cost
principle dictates that most assets and liabilities should be recorded at ...
Submitted by blondmnkey on November 28, 2005
Category: Business
Words: 5506 | Pages: 23
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Chapter 10: Long-Term Assets
L01 Types of Long-Term Assets and Issues Related to Accounting for them
Long-Term Assets:
o Useful life > 1
o Used in operations
o Not for sale
Carrying Value or Book Value (vs. basis)
Asset Impairment
o Occurs when future cash flow (w/o discount) < carrying value
o Reduce carrying value to present value for future cash flows
Tangible Assets Depreciation (except Land)
Natural Resources Depletion
Intangible Assets Amortization (except goodwill)
Acquisition of long term assets (investing activity)
o Payback period
o NPV calculation
Financing long-term assets (financing activity)
o Matching the period of estimated useful life the period of payback
o NYS example with school districts
Applying Matching Rule to Long-Term Assets
o Relevance vs. Reliability
1. Determine cost (original carrying value)
2. Allocate against revenue
3. Distinguish between repairs and betterments for accounting purposes
4. Treatment of disposal
L02 Acquisition Cost of P,P&E
Capital expenditure vs. revenue expenditure
o "benefit future periods"
o "Support but not extend benefit period"
Cost includes all costs necessary to
o Put asset in place & ready to use
o Management's judgment to policies apply
o Includes interest during period of construction
Land & Land Improvement
o Driveways, fences, parking lots, lightning
Buildings & leasehold improvement (treated as intangible in textbook)
o Over useful life
o Over lease term, if less
Equipment
Group purchases appraisals
L03 Accounting for Depreciation
Allocate cost over useful life
o Not the valuation issue
Cost, Residual...
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