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Accounting Chapter 8
Terms in this set (40)
tangible assets used in a companay's operations that have a useful life of more that one accounting perios.
Cost of Plant Assets
includes all normal and reasonable expenditures necessary to get an asset in plane and ready for its intedned use. Taxes, installment fee, purchase price, testing fees, everything charge prior to use.
has an unlimited life and is not usually used up over time
Cost of Land
Commision, title insurance fees, legal fees, and any accrued property taxes paid by the purchaser, removal of anything off of the land.
parking lot surfaces, driveways, fences, and lighting systems, all of which has useful lives
cost include purchase price brokaerage fees, taxes, titale and attorney fees and all expenditures that make it usable
Machinery and equipment
cost include purchse price, tazes transportation chargets, insurance while in transit, and istalling, assembly and testing of the machineray and equipment.
Lump Sum Asset purchase
the puchase of a group of plant assests as a group in a single tansation for a lump-sum price
The precess of allocating the ost of a plant asset to expense in the accounting periods benefiting form its use
consistys of all necessary and resonable expenditures to acquire the plant asset and to prepare it for its intended use.
an estimate of the asset's value at the end of it benfit period- also call scrap value or residual value.
length of time the asset is expected to be productivitly used in a company's operations.
Factors effecting useful life
Wera and reat form use
the capacity of plant assets that is unable to meet the company's growing productive demands
regers to a plant asset that is no longer useful in producing goods or services with a competitive advantage becuase of new inventions and improvements.
Straight-line method defenition
charges the same amouint to expense for each period of the asset's useful life; most frequently ised method
Straight line method formula
Depreciation= (Cost-salvage value)/ Useful Life in Years
Depreciation= (Cost-salvage value)/ Useful Life in Units
AD=Depreciation per unit * units produced
Double Declining balance method def
an accelerated depreciation method that yields larger depreciation expense during the early years of an ssets life and less depreciation in the later years
Double Declining balance method formula
Book value * 2(straight line rate)
Entry to record depreciation
Asset-Accumulated Depreciation(contra asset)=Book Value
Asset-Accumulated Depreciation(conrta asset)=Book Value
Plant Assets are reported on the balance sheet
at book value not market value
Goes on the income statement
are additional costs of plant assets that do not materially increase the assets life or productive capabililties, the are recorded as an exprense and reported on the income statement
balance sheet expenditures
additional costs of plant assets that provide benefits extending beyond the current period, the are depited to asset accounts and reported on the balance sheet
Entry to record discarding Plant assets
Long term asset account(buliding Equipment)
Entry to record sale at book value(no gain no loss)
Entry to record sale above book value
Gain on Disposal
Entry to record sale below book value
Loss on Sale
assets that are phuysically consumed when used such as timber mineral depoists, and oil and gas fields, also called wasting assets
the process of allocating the cost of natural resoureces to the period when it is consumed
Non physical assets(used in operations) that confer on thier owners long term reights, privileges\, or competitive adcantages
Intangible assets are recorded
when purchased from an outside sourece. Its cost is sytematically allocated to expense over its estimated useful lie through amortization
similar to decreciation and depletion, except that only the straight line method is generally used for amortization
Amotization is subtracted from the cost of the asset and placed on...
Types of intangibles
Patents, Copyrights, Leasehold, leasehold improvementes, Granchises and Licenses, Trandmarks and Trade Manes, Goodwill
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