Chapter 8 Powerpoint
Financial Accounting
John J. Wild
Sixth Edition
McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 08
Reporting and Analyzing Long-Term Assets
Conceptual Learning Objectives
C1: Explain the cost principle for computing the cost of plant assets. C2: Distinguish between revenue and capital expenditures, and account for them. C3: Explain depreciation for partial years and changes in estimates.
8-3
Analytical Learning Objectives
A1: Compute total asset turnover and apply it to analyze a company’s use of assets.
8-4
Procedural Learning Objectives
P1: Compute and record depreciation using the straight-line, units-of-production, and decliningbalance methods. P2: Account for asset disposal through discarding or selling an asset. P3: Account for natural resource assets and their depletion. P4: Account for intangible assets. P5: Appendix 8A – Account for asset exchanges (see text for details).
8-5
C1
Plant Assets
Tangible in Nature
Actively Used in Operations
Expected to Benefit Future Periods
Called Property, Plant & Equipment
8-6
C1
Plant Assets
Acquisition 1. Compute cost
Use 2. Allocate cost to periods benefited 3. Account for subsequent expenditures
Disposal 4. Record disposal
8-7
C1
Land and Buildings
Land is not a depreciable asset, but land improvements are.
The cost of buildings include many costs; the purchase price plus the following:
Cost of purchase or construction Brokerage fees Taxes
8-8
Title fees Attorney fees
C1
Machinery and Equipment
Purchase price
Taxes
Transportation charges Installing, assembling, and testing
Insurance while in transit
8-9
C1
Lump-Sum Asset Purchase
The total cost of a combined purchase of land and building is separated on the basis of their relative market values.
On January 1, Matrix, Inc. purchased land and building for $200,000 cash. The appraised values are building,
John J. Wild
Sixth Edition
McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved.
Chapter 08
Reporting and Analyzing Long-Term Assets
Conceptual Learning Objectives
C1: Explain the cost principle for computing the cost of plant assets. C2: Distinguish between revenue and capital expenditures, and account for them. C3: Explain depreciation for partial years and changes in estimates.
8-3
Analytical Learning Objectives
A1: Compute total asset turnover and apply it to analyze a company’s use of assets.
8-4
Procedural Learning Objectives
P1: Compute and record depreciation using the straight-line, units-of-production, and decliningbalance methods. P2: Account for asset disposal through discarding or selling an asset. P3: Account for natural resource assets and their depletion. P4: Account for intangible assets. P5: Appendix 8A – Account for asset exchanges (see text for details).
8-5
C1
Plant Assets
Tangible in Nature
Actively Used in Operations
Expected to Benefit Future Periods
Called Property, Plant & Equipment
8-6
C1
Plant Assets
Acquisition 1. Compute cost
Use 2. Allocate cost to periods benefited 3. Account for subsequent expenditures
Disposal 4. Record disposal
8-7
C1
Land and Buildings
Land is not a depreciable asset, but land improvements are.
The cost of buildings include many costs; the purchase price plus the following:
Cost of purchase or construction Brokerage fees Taxes
8-8
Title fees Attorney fees
C1
Machinery and Equipment
Purchase price
Taxes
Transportation charges Installing, assembling, and testing
Insurance while in transit
8-9
C1
Lump-Sum Asset Purchase
The total cost of a combined purchase of land and building is separated on the basis of their relative market values.
On January 1, Matrix, Inc. purchased land and building for $200,000 cash. The appraised values are building,