财务会计概念与应用英文版Lecture9课件

1、Chapter 9Investments in Property, Plant, and Equipment and in Intangible AssetsAlbrecht, Stice, Stice, Swain1*第1页，共32页。Long-Term AssetsProperty, plant, and equipmentTangible assets acquired for the use in business operations.Land, buildings, and equipment.Intangible AssetsAssets without physical sub

2、stance that are used in business.Licenses, patents, franchises, and goodwill.2第2页，共32页。Capital BudgetingCapital budgetingPlanning 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 valu

3、e of the expected cash flows, after adjusting for the time value of money.Time value of moneyThe concept that a dollar today is worth more than a dollar received in the future.3第3页，共32页。Asset AcquisitionInclude purchase price.Include costs incurred to acquire the asset and getting it ready for its i

4、ntended use.Sales tax, shipping, installation, and other costs.Fork Lift. . . . . . . . . . . . . . . . . . . . . . . .12,500Cash. . . . . . . . . . . . . . . . . . . . . . . .3,500Notes Payable. . . . . . . . . . . . . . . .9,000Purchased a fork lift for $12,000 and paid $500 for shipping; paid $3,

5、500 cash and issued a note for $9,000 to the bank.4第4页，共32页。LeasesLeaseA 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?TermPayment amountDue dates5

6、第5页，共32页。Match Lease TermsThe party that is granted the right to use the property under the terms of a lease.LesseeLessorOperating LeaseCapital LeaseThe owner of property that is leased (rented) to another party.A simple rental agreement.A leasing transaction that is recorded as a purchase by the le

7、ssee.6第6页，共32页。Classifying LeasesA 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.Present valu

8、e of the lease payments is equal to 90% or more of the fair market value of the asset.7第7页，共32页。Operating LeaseDahl & 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.Rent (or Lease) Expense . . . . .

9、 . . . . .1,000 Cash. . . . . . . . . . . . . . . . . . . . . . . .1,000To record monthly rent of storage building.8第8页，共32页。Capital LeaseDahl & Sons enters 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 ow

10、n the property. The present value of the lease payments at a 10% discount rate is $851,360. Make the appropriate entries.Leased Property. . . . . . . . . . . . . . . . 851,360Lease Liability. . . . . . . . . . . . . . . . 851,360To record commercial building acquired under a 20-year non-cancelable l

11、ease.Lease Liability. . . . . . . . . . . . . . . . . . 14,864 Interest Expense. . . . . . . . . . . . . . . . 85,136 Cash. . . . . . . . . . . . . . . . . . . . . . . . 100,000To record annual payment under capital lease.9第9页，共32页。Assets Acquired bySelf ConstructionSelf-constructed assetsRecorded a

12、t 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.10第10页，共32页。Basket Purchases %When two or more asset

13、s 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.Land. . . . . . . . . . . . . . . . . . . . . . . . . . .900,000

14、 Building. . . . . . . . . . . . . . . . . . . . . . . .2,700,000Cash. . . . . . . . . . . . . . . . . . . . . . . .3,600,000To record building and land acquired for $3,600,000. 3,000,000100$3,600,000AssetFMV% of TotalValueCostLand$1,000,000 25%0.25 x $3,600,000 =$ 900,000Building 750.75 x $3,600,00

15、0 = 2,700,000Total$4,000,00011第11页，共32页。DepreciationDepreciationThe process of cost allocation that assigns the original cost of plant and equipment to the periods benefited.Book valueThe assets original cost less any accumulated depreciation.Salvage valueThe amount expected to be received when the

16、asset is sold at the end of its useful life.12第12页，共32页。Straight-Line DepreciationCosts assigned equally to all periods benefited.Annual DepreciationExpense=Cost - Salvage valueEstimated usefullife (years)=$24,000 - $2,0004 years$5,500Depreciation Expense. . . . . . . . . . . . . . . . . 5,500Accumu

17、lated Depreciation. . . . . . . . . . . 5,500To record annual depreciation for truck.13第13页，共32页。Units-of-Production DepreciationAssigning depreciation according to what has been used during the year.Per UnitDepreciation=Cost - Salvage valueEstimated life in unitsDepreciationExpense=Per unitdeprecia

18、tionxUnitsproducedDepreciation Expense. . . . . . . . . . . . . . . . . 4,400Accumulated Depreciation. . . . . . . . . . . 4,400To record annual depreciation for truck.($24,000 - $2,000)60,000 milesx12,000miles=$4,40014第14页，共32页。Partial-Year DepreciationStraight-line methodCalculate depreciation exp

19、ense for the year.Distribute it evenly over the number of months the asset is held during the year.Units-of-production methodThe same as normal because it is based off of the actual usage.15第15页，共32页。Repairing and Improving AssetsOrdinary expendituresTypically benefit only the period in which they a

20、re made. (i.e. repairs, maintenance, and minor improvements.)Expense when incurred.Capital expendituresSignificant 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.Depre

21、ciated over the remaining life of the asset.16第16页，共32页。ImpairmentsImpairmentA decline in the value of a long-term operating asset.Sum of Future Cash Flows from AssetBook Value of AssetIs Sum of Future Cash Flows Less than the Book Value?IMPAIRMENTRecognize Loss and Record Asset at FAIR VALUE.NO IMP

22、AIRMENTContinue to Recognize Asset at BOOK VALUE.YESNO17第17页，共32页。ImpairmentsJournal 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.Accumulated Depreciation. . . . . . . . . . . .

23、 . 4,000Loss on Impairment of Equipment . . . . . . 1,000Building . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000To record impairment of building.18第18页，共32页。Discarding and Selling Long-Term AssetsAn assets cost and accumulated depreciation must be removed from the accounting records.Asset

24、s can be:Discarded (scrapped)SoldExchanged19第19页，共32页。Discarding Property, Plant, and EquipmentAccumulated Depreciation, Conveyor . . . 15,000Loss on Disposal of Conveyor . . . . . . . . . 300 Conveyor. . . . . . . . . . . . . . . . . . . . . . . . 15,000 Cash. . . . . . . . . . . . . . . . . . . .

25、. . . . . . . . 300 Scrapped $15,000 copier and paid $300 disposal costs.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 to have the copier removed, what is the appropriate entry?20第20

26、页，共32页。Selling Property, Plant, and EquipmentCash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600Accumulated Depreciation, Conveyor . . . 12,000Loss on Sale of Conveyor. . . . . . . . . . . . . 2,400Conveyor. . . . . . . . . . . . . . . . . . . . . . . . . 15,000Sold $15,000 copier

27、at a loss of $2,400.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 of service, Dahl & Sons will experience a loss of $2,400. Make the appropriate en

28、try.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.21第21页，共32页。Accounting for IntangiblesIntangiblesRights and privileges that are:Long-lived.Not held for resale.Have no physical substance.Providing o

29、wner with competitive advantage over other firms.AmortizationPeriodic allocation to expense of an intangible assets cost.Conceptually, the same as depreciation.Intangible assets generally use straight-line amortization.22第22页，共32页。Types of IntangiblesPatentAn exclusive right granted for 17 years by

30、the U.S. Federal Government to manufacture and sell an invention.FranchiseAn entity that has been licensed to sell the product of a manufacturer or to offer a particular service in a given area.LicenseThe right to perform certain activities, generally granted by a government agency.23第23页，共32页。Recog

31、nizing Intangible AssetsIntangible 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 amortized.Intangible assets must be analyzed to determine if impairment has oc

32、curred.24第24页，共32页。GoodwillGoodwillAn intangible asset that exists when a business is valued at more than the fair market value of its net assets, usually due to:Strategic locationReputationGood customer relationsEqual to the excess of the purchase price over the fair market value of the net assets

33、purchased.25第25页，共32页。Accounting for GoodwillDahl & Sons purchased Clark & Associates for $1,200,000. At the time, the following market values existed for Clarks assets and liabilities:Inventory$750,000 Long-term operating assets220,000 Other assets25,000 Liabilities (18,000)Total Net Assets$977,000

34、 Inventory. . . . . . . . . . . . . . . . . . . . . . 750,000Long-Term Operating Assets . . . . 220,000Other Assets. . . . . . . . . . . . . . . . . . 25,000Goodwill . . . . . . . . . . . . . . . . . . . . . 223,000Liabilities. . . . . . . . . . . . . . . . . . 18,000Cash . . . . . . . . . . . . . .

35、 . . . . . . . .1,200,000Purchased Clark & Associates for $1,200,000.26第26页，共32页。Measuring the Management of Long-Term AssetsFixed Asset TurnoverThe amount of dollars in sales generated by each dollar of fixed assets.Standard values for this ratio differ from industry to industry.SalesAverage PP&E27

36、第27页，共32页。Accelerated Depreciation MethodsDeclining-balance methodAn assets book value is multiplied by a constant depreciation rate.This is double the straight-line percentage in the case of double-declining balance (DDB).Sum-of-the-years-digits methodA constant balance (cost minus salvage value) is multiplied by a declining depreciation rate calculated based off of the sum of the years.28第28页，共32页。Double-Declining-BalanceX 2 =Double-Declining BalanceDepreciation ExpenseBook ValueAssets Life in YearsBook Value = Cost Accumulated DepreciationYear 1($12,000