财务会计概念与应用英文版Lectu

1、1,Chapter 9,Investments in Property, Plant, and Equipment and in Intangible Assets,Albrecht, Stice, Stice, Swain,2,Long-Term Assets,Property, plant, and equipment Tangible assets acquired for the use in business operations. Land, buildings, and equipment. Intangible Assets Assets without physical su

2、bstance that are used in business. Licenses, patents, franchises, and goodwill.,3,Capital Budgeting,Capital budgeting Planning for investment in long-term assets. Long-term assets have value because they help companies generate future cash flows. Involves comparing the cost of the asset to the value

3、 of the expected cash flows, after adjusting for the time value of money. Time value of money The concept that a dollar today is worth more than a dollar received in the future.,4,Asset Acquisition,Include purchase price. Include costs incurred to acquire the asset and getting it ready for its inten

4、ded use. Sales tax, shipping, installation, and other costs.,5,Leases,Lease A contract that specifies the terms under which the owner of an asset (the lessor) agrees to transfer the right to use the asset to another party (the lessee). What terms should be included in a lease? Term Payment amount Du

5、e dates,6,Match Lease Terms,The party that is granted the right to use the property under the terms of a lease.,Lessee,Lessor,Operating Lease,Capital Lease,The owner of property that is leased (rented) to another party.,A simple rental agreement.,A leasing transaction that is recorded as a purchase

6、by the lessee.,7,Classifying Leases,A lease is classified as a capital lease if it is non-cancelable and meets one of the following criteria: Lease transfers ownership of the asset. Lease contains a bargain purchase option. Lease term is equal to 75% or more of the estimated life of the asset. Prese

7、nt value of the lease payments is equal to 90% or more of the fair market value of the asset.,8,Operating Lease,Dahl & Sons, Attorneys at Law, leases a building with monthly rental payments of $1,000. Make the appropriate entry if rent is paid in cash the first month.,9,Capital Lease,Dahl & Sons ent

8、ers into a non-cancelable lease agreement that requires lease payments of $100,000 a year for 20 years. At the end of 20 years, Dahl & Sons will own the property. The present value of the lease payments at a 10% discount rate is $851,360. Make the appropriate entries.,10,Assets Acquired bySelf Const

9、ruction,Self-constructed assets Recorded at cost. Include all expenditures incurred to build the asset and make it ready for its intended use. Costs include: Materials used to build the asset. The construction labor. Capitalized interest. Some reasonable share of the general company overhead.,11,Bas

10、ket Purchases,%,When two or more assets are acquired at a single price, the prices are allocated on the “relative fair market value” method. In this example, Dahl and Sons purchased land and a building at a total cost of $3,600,000. Prepare the entry to record the purchase.,12,Depreciation,Depreciat

11、ion The process of cost allocation that assigns the original cost of plant and equipment to the periods benefited. Book value The assets original cost less any accumulated depreciation. Salvage value The amount expected to be received when the asset is sold at the end of its useful life.,13,Straight

12、-Line Depreciation,Costs assigned equally to all periods benefited.,14,Units-of-Production Depreciation,Assigning depreciation according to what has been used during the year.,15,Partial-Year Depreciation,Straight-line method Calculate depreciation expense for the year. Distribute it evenly over the

13、 number of months the asset is held during the year. Units-of-production method The same as normal because it is based off of the actual usage.,16,Repairing and Improving Assets,Ordinary expenditures Typically benefit only the period in which they are made. (i.e. repairs, maintenance, and minor impr

14、ovements.) Expense when incurred. Capital expenditures Significant in amount and benefit more than the current period. Increase the productive life or capacity of the asset. (i.e. engine overhaul, components added.) Capitalize and add to asset value. Depreciated over the remaining life of the asset.

15、,17,Impairments,Impairment A decline in the value of a long-term operating asset.,Sum of Future Cash Flows from Asset,Book Value of Asset,Is Sum of Future Cash Flows Less than the Book Value?,IMPAIRMENT Recognize Loss and Record Asset at FAIR VALUE.,NO IMPAIRMENT Continue to Recognize Asset at BOOK

16、VALUE.,YES,NO,18,Impairments,Journal entry reduces property value as listed on balance sheet and clears out the accumulated depreciation. Increases in asset values can never be recognized according to GAAP.,19,Discarding and Selling Long-Term Assets,An assets cost and accumulated depreciation must b

17、e removed from the accounting records. Assets can be: Discarded (scrapped) Sold Exchanged,20,Discarding Property, Plant, and Equipment,Dahl & Sons purchased an advance copier system for $15,000. It has a 5-year life, no salvage value, and is depreciated on a straight-line basis. If Frank pays $300 t

18、o have the copier removed, what is the appropriate entry?,21,Selling Property, Plant, and Equipment,Dahl & Sons purchased an advanced copier system for $15,000. It has a 5-year life, no salvage value, and is depreciated on a straight-line basis. If the copier is sold for $600 after only four years o

19、f service, Dahl & Sons will experience a loss of $2,400. Make the appropriate entry.,Losses are incurred when the asset is sold for less than the book value and gains are recorded when the asset is sold for more than the book value.,22,Accounting for Intangibles,Intangibles Rights and privileges tha

20、t are: Long-lived. Not held for resale. Have no physical substance. Providing owner with competitive advantage over other firms. Amortization Periodic allocation to expense of an intangible assets cost. Conceptually, the same as depreciation. Intangible assets generally use straight-line amortizatio

21、n.,23,Types of Intangibles,Patent An exclusive right granted for 17 years by the U.S. Federal Government to manufacture and sell an invention. Franchise An entity that has been licensed to sell the product of a manufacturer or to offer a particular service in a given area. License The right to perfo

22、rm certain activities, generally granted by a government agency.,24,Recognizing Intangible Assets,Intangible assets are only recognized in the financial statements if they have been purchased. Amortize over the economic life of the intangible asset. Intangible assets with indefinite lives are not am

23、ortized. Intangible assets must be analyzed to determine if impairment has occurred.,25,Goodwill,Goodwill An intangible asset that exists when a business is valued at more than the fair market value of its net assets, usually due to: Strategic location Reputation Good customer relations Equal to the

24、 excess of the purchase price over the fair market value of the net assets purchased.,26,Accounting for Goodwill,Dahl & Sons purchased Clark & Associates for $1,200,000. At the time, the following market values existed for Clarks assets and liabilities:,27,Measuring the Management of Long-Term Asset

25、s,Fixed Asset Turnover The amount of dollars in sales generated by each dollar of fixed assets. Standard values for this ratio differ from industry to industry.,28,Accelerated Depreciation Methods,Declining-balance method An assets book value is multiplied by a constant depreciation rate. This is do

26、uble the straight-line percentage in the case of double-declining balance (DDB). Sum-of-the-years-digits method A constant balance (cost minus salvage value) is multiplied by a declining depreciation rate calculated based off of the sum of the years.,29,Double-Declining-Balance,X 2 =,Dahl & Sons purchased a truck for $12,000. The truck has a salvage value of $2,000 and a use