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24 Cards in this Set
- Front
- Back
- 3rd side (hint)
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property, plant and equipment (PPE)
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- non-current assets used is the operations of a company
- have a useful life greater than one accounting period may be classified as tangible or intangible - also referred to as fixed cost examples; buildings, land, equipment, machinery, leasehold improvements and vehicles |
maybe classified as tangible or intangible
referred to fixed assets |
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intangible assets
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- lack physical substance
- examples : patents, trademarks, copyrights, leaseholds and drilling rights |
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Cost of PPE
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-PPE are recorded at cost
-which includes all normals and reasonable expenditure |
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capital expenditures
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- are costs of PPE that provide material benefits extending beyond the current period
- are reported on the balance sheet under ppe |
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revenue expenditure
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- are costs that maintain an asset but do not materially increase the assets
- are reported on the income statement as expenses -examples; supplies, lubricants, repair & maintenance costs |
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subsequent expenditure
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- expenditure that makes ppe more efficient or productive and/or extend the useful life of the ppe
- examples; roofing replacement, plant expansion and major over hauls of machinery and equipment |
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land
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-is not subject to depreciation
-cost of land includes: purchase price,legal fees, real estate commissions,accrued property taxes, payment for surveying and assessments by local governments |
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land improvements
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-assets that increase the usefulness of the land but have a limited life
-costs are charged to a separate ppe account -costs are allocated over the period they benefit -cost examples include parking lot surfaces, driveways, fences and lighting systems |
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buildings
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-costs include all expenditures to make the building ready for its intended use
-costs are depreciated over the period they benefit - examples purchase price, brokerage fees, taxes, title fees and legal costs |
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leasehold improvements
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-costs of alterations or improvements to leased property
-costs are depreciated over the life of the improvements or the life of the lease -examples include flooring, painting, storefronts & partitions |
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machinery and equipment
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-costs include all expenditures normal and necessary to purchase it and prepare it for its intended use
- examples include purchase price,less discounts, plus non-refundable sales taxes, transportation charges, insurance |
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lump - sum asset purchase
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-ppe may be purchased in a group with a single transaction for a lump - sum price
-the cost of the purchase is allocated to the various ppe based on their relative values |
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depreciation
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- a process of matching or allocating the depreciable cost of an asset in a rational and systematic manner over the assets useful life
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depreciation
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factors relevant in determining depreciation:
1. cost 2. residual value 3. useful life |
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depreciation methods
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1. straight line
2. units of production 3. double declining balance |
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straight line method
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- the same amount is expensed each period of the assets useful life
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units of production method
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- this method is employed when the use of an asset varied greatly from one period to the next
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declining balance method
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- this method yields larger depreciation expenses in the early years of an assets life and smaller charges in later years
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partial year depreciation
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- assets may be purchased or disposed of at any time during the year
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impairment of ppe assets
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- an impairment loss occurs when the book value of ppe is greater than the amount to be recovered through the assets use or sale
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impairment of ppe assets
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if an impairment loss occurs
. the loss is recorded . depreciation is revised for future periods |
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intangible assets
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- are recorded at cost when purchased
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goodwill
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- the amount by which the price paid for a company exceeds the fair market value
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revising depreciation rates
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-depreciation rates for current and future periods may be revised if there is a change in an asset
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