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Published byDorcas Hancock Modified over 9 years ago
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Chapter 7 Summary
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Tangible Land Land Improvements Buildings Equipment Vehicles Natural Resources Actual Ownership Rights to Mine Intangibles Patents Copy Rights Trade Marks
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All Costs Associated with Purchase of Asset ◦ Costs needed to use Asset for Intended Purpose
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Lump-Sum (Basket) Purchase Determine Market (Appraised) Value of each Asset separately Determine relative % of each assets Market Value to Total Market value Multiply market value % (weight) by Lump-Sum Cost
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Assets: ◦ Economic Resources that provide a future Benefit ◦ Benefit provided by Long-Term Assets Revenue Matching Principle ◦ Record any costs associated with Revenue Earned in the Period ◦ Consumption of Assets are a Cost, so we must Expense
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Depreciation Tangible Asset Depletion Natural Resource Amortization Intangible
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(Cost – Residual Value) / Useful Life Straight Line (Cost – Residual Value) / Total Units Cost per Unit x Units Produced Units of Production 2 x SL Rate = 2 x (1/Useful Life) Book Value x 2xSL rate Double Declining Balance
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Deprecation Expense xxxx Accumulated Depreciation xxxxxx Accumulated Depreciation is a ◦ Contra Asset Asset – Accumulated Depreciation = ◦ Book Value of the Asset
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Capital Expenditure ◦ Add Cost to existing Asset and depreciate Rules: ◦ Capital Expenditures Increase the capacity of the asset It can do more Drive more, make more copies, produce more widgets Increase the useful life of the asset It will last longer ◦ Immediate Expense Maintenance costs or Restoration costs
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