Cost consists of all expenditures necessary to acquire an asset and make it ready for its intended use. The net amount of cash provided or used by operating activities during the month of July was $0. If the company receives a $12,000 trade‐in allowance, a gain of $2,000 occurs.

__________ Improvement to a machine that increased its fair value and its production capacity by 30% without extending the machine’s useful life. __________ Expenditure that increases the quality of the output of the productive asset. E Santana Company exchanged equipment used in its manufacturing operations plus $2,000 in cash for similar equipment used in the operations of Delaware Company. Ing items that were used in determining the basis for depreciating the cost of a building. 3 Net income for 2001 would have been a loss, amount to be determined.

Problem Solving Survival Guide to accompany Intermediate Accounting, Volume 1: Chapters 1 – 14, 15th Edition by

The inclusion of interest costs in the cost of a constructed building is limited to the construction period. All necessary expenditures relating to the purchase or construction of a building are charged to the building account. Plant assets are resources that have physical substance , are used in the operations of a business, and are not intended for sale to customers. Dispositions Of Plant Assets We will demonstrate the loss on the disposal of an asset in Good Deal’s next transaction. Suppose a $90,000 delivery truck with a net book value of $10,000 is exchanged for a new delivery truck. The company receives a $6,000 trade‐in allowance on the old truck and pays an additional $95,000 for the new truck, so a loss on exchange of $4,000 must be recognized.

Various other costs relating to the acquisition and installation of the machine including transportation, electrical wiring, special base, and so on amount to $7,500. The machine has an estimated life of 10 years, with no residual value at the end of that period. The owner of the business suggests that the incidental costs of $7,500 be charged to expense immediately for the following reasons.

Property Plant and Equipment Schedule Template

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. In the United States, Deloitte refers to one or more of the US member firms of DTTL, their related entities that operate using the “Deloitte” name in the United States and their respective affiliates. Certain services may not be available to attest clients under the rules and regulations of public accounting.

BE10-14 Ottawa Corporation owns machinery that cost $20,000 when purchased on July 1, 2009. Depreciation has been recorded at a rate of $2,400 per year, resulting in a balance in accumulated depreciation of $8,400 at December 31, 2012. The machinery is sold on September 1, 2013, for $10,500. Prepare journal entries to update depreciation for 2013 and record the sale. Repairs A company makes ordinary repairs to maintain plant assets in operating condition. It charges ordinary repairs to an expense account in the period incurred, on the basis that it is the primary period benefited.

Determine periodic depreciation using both time-based and

2 Planned to amortize $3.1 billion over a period of time, possibly as much as 10 years. When the monetary consideration is significant, i.e., 25 percent or more of the fair value of the exchange, both parties consider the transaction a monetary exchange. Such “monetary” exchanges rely on the fair values to measure the gains or losses that are recognized in their entirety.

Of course, when the sales price equals the asset’s book value, no gain or loss occurs. Whatever the circumstance, you need to make sure the company has completely removed the cost of the asset and its accumulated depreciation from the balance sheet. Additionally, if the company made or lost any money with the transaction, that amount has to be recorded on the income statement. The journal entry to record the sale or disposition of a depreciable plant asset always includes ______. To what extent do you consider the following items to be proper costs of the fixed asset?

how Long-lived Assets are Reported on the Balance Sheet

The annual rate of depreciation is computed by dividing the years in the life of the asset into 100% or 1. Once a method is chosen, it should be applied consistently over the useful life of the asset. Recognizing depreciation for an asset does not result in the accumulation of cash for replacement of the asset. The revenue-producing ability of a depreciable asset declines during its useful life because of wear and tear.

Should companies record this promise immediately or when they give the assets? If the promise is unconditional , the company should report the contribution expense and related payable immediately. If the promise is conditional, the company recognizes expense in the period benefited by the contribution, generally when it transfers the asset. The FASB recently changed its accounting for exchanges to converge with IFRS. Previously, the FASB used a “similar in nature” criterion for exchanged assets to determine whether gains should be recognized. With use of the commercial substance test, GAAP and IFRS are now very similar. Interest expense in the second year under the effective-interest approach is $6,340 [($100,000 2 $24,184) 2 ($20,000 2 $7,582)] 3 10%.

Capital Expenditures

The useful life of a copyright generally is significantly shorter than its legal life. There are uncertainties in identifying the extent and timing of the future benefit of these expenditures. The return on assets ratio can be computed from the profit margin ratio and the asset turnover https://simple-accounting.org/ ratio. Impairment- a permanent decline in the market value of an asset. Ordinary repairs are debited to Repair Expense and are immediately charged against revenues. When a change in an estimate is required, the change is made in current and future years but not to prior periods.

• E Logan Industries purchased the following assets and constructed a building as well.
• A long-lived asset classified as held for sale should be measured at the lower of its carrying amount or fair value less cost to sell.
• As a result, research and development costs are usually recorded as an expense when incurred.
• The cash equivalent price is equal to the fair market value of the asset given up or the fair market value of the asset received, whichever is more clearly determinable.
• Junking an asset means it’s totally worn out and thrown away.

COSTS SUBSEQUENT TO ACQUISITION LEARNING OBJECTIVE 6 Describe the accounting treatment for costs subsequent to acquisition. Describe the accounting treatment for the disposal of property, plant, and equipment.

By comparing an asset’s book value with its selling price , the company may show either a gain or loss. If the sales price is greater than the asset’s book value, the company shows a gain. If the sales price is less than the asset’s book value, the company shows a loss.