Ac341, Chapter 10, Property Plant & Equipment & Intangible Assets: Acquisition And Disposition

Front 1

Explain the difference between tangible and intangible long-lived, revenue-producing assets.

Back 1

Tangible have a fixed price at purchase and can be transferred to another owner. Intangible assets cannot be transferred or purchased, and have exclusive rights that provide benefits to only the owner. Intangible assets lack physical substance. Future benefits are more difficult to determine of intangible assets.

Front 2

What is included in the original cost of property plant and equipments and intangible assets acquired in an exchange transaction?

Back 2

PPE & Intangible assets include the purchase price and all expenditures necessary to bring the asset to its desire condition and location for use.

Front 3

Identify the costs associated with the initial valuation of a developed natural resource.

Back 3

Acquisition, exploration, development, and restoration costs.

Front 4

Briefly summarize the accounting treatment for intangible assets, explaining the difference between purchased and internally developed intangible assets.

Back 4

Amortize its cost, unless it has an indefinite useful life. Purchased intangibles are already existing assets, developed assets are internally developed such as a new product or process that is patented.

Front 5

What is goodwill and how is it measured?

Back 5

Goodwill the asset remainder of the amount of the exchange less the value of the net asset acquired. Its a residual assets.

Front 6

Explain the method generally used to allocate the cost of a lump-sum purchase to the individual assets acquired.

Back 6

The total purchase price is allocated in accordance with the proportion of the relative fair values of the assets acquired.

Front 7

When an asset is acquired and a note payable is assumed, explain how acquisition cost of the asset is determined when the interest rate for the note is less than the current market rate for similar notes.

Back 7

? This is considered a discount and the acquisition price is determined by calculating the present value of the amount promised to pay.

Asset xx

Discount on Note Pay xx

Notes Payable xx

Front 8

Explain how assets acquired in exchange for equity securities are valued.

Back 8

Valued by either the fair value of the securities issued or by the fair value of the assets, whichever is most evident.

Front 9

Expain how property, plant and equipment and intgible assets acquired through donation are valued.

Back 9

Must be valued at the fair market value. Donated assets are recorded as revenue.

Front 10

When an item of property, plant and equipment is disposed of, how is gain or loss on disposal computed?

Back 10

Book Value (carrying value) less and accumulated depreciation, less cash on sale (if any) = gain or loss.

Front 11

What is the basic principal for valuing property, plant and equipment and intangible assets acquired in exchange for other non monetary assets?

Back 11

We value the PPE in an exchange at either fair value of the asset given up or at the fair value of the asset obtained, less any cash received.

Front 12

Identify the two exceptions to valuing property, plant and equipment and intangible assets acquired in non monetary exchange at the fair value of the assets given up.

Back 12

1. Fair Value is not determinable

2. Exchange lacks commercial substance, for example exchange results in no change for book value and no expected increase in future revenue

Front 13

In what situations is interest capitalized?

Back 13

During the development of self-constructed assets, interest incurred should be capitalized because these assets are not yet producing revenues.

Front 14

Define average accumulated expenditures and explain how the amount is computed.

Back 14

This is the average debt necessary to for construction. Total expenditures incurred evenly throughout the construction period/2.

If not incurred evenly, the we use a time- weighting individual expenditures by the number of months from their incurrence to the end of the construction period.

Front 15

Explain the difference between the specific interest method and the weighted-average method in determining the amount of interest to be capitalized.

Back 15

When a construction loan is not taken for a project, interest to be capitalized is determined by calculating the weighted average of general load borrowing during the time period. The weighted average interest is calculated by determining total interest paid during period, the determining this amount as a percentage of the total amount borrowed. The specific interest method calculated interest to be capitalized based upon construction loans obtained.

Front 16

Define R & D according to US GAAP

Back 16

Research is planned search or critical investigation aimed at discovery of new knowledge with the hope of such knowledge will be useful in developing a new product or service or new process or technique or in bringing about a significant improvement to an existing product or process. Development is the translation of research finding or other knowledge into a plan or design for a new product or precess or for a a significant improvement to an existing product or process intended for sale or use.

Front 17

Explain the accounting treatment of equipment acquired for use in R&D projects.

Back 17

If the equipment acquired is used solely for the purpose of the R&D, then it will be expensed with R&D. If the asset has a future use beyond the R&D then it is amortized and depreciated is not a current R&D expense.

Front 18

Explain the accounting treatment of costs incurred to develop computer software.

Back 18

Cost incurred in the development of computer software are expensed as incurred until it is determined the software is viable, and then they can be capitalized.

Front 19

Explain the difference in the accounting treatment of the cost of developed technology and the cost of in-process R&D in an acquisition.

Back 19

In-process R&D is capitalized as an indefinite-life intangible asset, until testing determines otherwize, then it is either amortized over the time period, or the R&D is expenses immediately when the project is considered impaired.

Front 20

Fixed Asset Ratio Turnover

Back 20

Net Sales/Average Fixed Assets