Reporting and Analyzing Long-Term Assets.ppt

Reporting and Analyzing Long-Term Assets UAA – ACCT 201 Principles of Financial Accounting Dr. Fred Barbee Revenue and Capital Expenditures If the amounts involved are not material, most companies expense the item. Revenue and Capital Expenditures Discarding Plant Assets Discarding Plant Assets Selling Plant Assets Selling Plant Assets Natural Resources Depletion of Natural Resources Total depletion cost for a period is: Depletion of Natural Resources ABC Mining acquired a tract of land containing ore deposits. Total costs of acquisition and development were $1,000,000 and ABC estimated the land contained 40,000 tons of ore. Plant Assets Used in Extracting Natural Resources Specialized plant assets may be required to extract the natural resource. These assets are recorded in a separate account and depreciated. Record at current cash equivalent cost, including purchase price, legal fees, and filing fees. Patents Copyrights Leaseholds LeaseholdImprovements Franchises and Licenses Goodwill Trademarks andTrade Names Accounting for Intangible Assets Usually amortized over shorter of economic life or legal life. Use straight-line method. Research and development costs are normally expensed as incurred. Goodwill Eddy Company paid $1,000,000 to purchase all of James Company’s assets and assumed liabilities of $200,000. The acquired assets were appraised at a fair value of $900,000. Cash Flow Impacts ofLong-Term Assets Investing Cash Inflow: Sale of Long-Term Assets Investing Cash Outflow: Purchase of Long-Term Assets. Accounting For Intangible Assets ACCT 201 ACCT 201 ACCT 201 Occurs when onecompany buysanother company. The amount by which thepurchase price exceeds the fairmarket value of net assets acquired. Goodwill Only purchased goodwill is an intangible asset. Accounting For Goodwill What amount of goodwill should be recorded on Eddy Company b