Professional Documents
Culture Documents
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 1
Plant Assets
Asset Account on the Balance Sheet Related Expense Account on the Income Statement
Plant Assets Land Buildings, Machinery and Equipment, Furniture and Fixtures, and Land Improvements Natural Resources.. Intangibles..
2002 Prentice Hall, Inc. Business Publishing Accounting, 5/E
none
Horngren/Harrison/Bamber
Objective 1
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 3
Cost Principle
An asset must be carried on the balance sheet at the amount paid for it. The cost of an asset equals the sum of all of the costs incurred to bring the asset to its intended purpose, net of discounts
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 4
$500,000
54,000 $554,000
10 - 5
Horngren/Harrison/Bamber
Land Improvements
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 6
Buildings Construction
Architectural fees Building permits Contractors charges
Buildings Purchasing
Purchase price Brokerage commissions Sales and other taxes Repairing or renovating building for its intended purpose
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 8
Capital Leases
What are capital leases? They are lease arrangements similar to installment purchases. Capital leases are reported as assets, even though the company does not own the asset. Leasehold improvements are similar to land improvements.
Dec. 31, 2002 Building (700,000 10%) 70,000 Interest Expense 30,000 Interest Payable 100,000 Accrued interest of construction loan
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 12
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 13
Land: $90,000 $150,000 = 60% $110,000 60% = $66,000 Building: $60,000 $150,000 = 40% $110,000 40% = $44,000
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 14
YES
Capital Expenditure Debit Plant Assets accounts
2002 Prentice Hall, Inc. Business Publishing
NO
Revenue Expenditure Debit Repairs and Maintenance account
Accounting, 5/E Horngren/Harrison/Bamber 10 - 15
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 16
Objective 2
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 17
Depreciation Methods
Straight-Line (SL)
Units-of-Production (UOP)
Double-Declining-Balance (DDB)
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 18
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 23
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 24
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 25
Objective 3
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 26
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 27
Straight-line method: $5,000 3/12 = $1,250 Double-declining-balance method: $11,000 3/12 = $2,750
2002 Prentice Hall, Inc. Business Publishing Accounting, 5/E Horngren/Harrison/Bamber 10 - 28
Objective 4
Account for the disposal of a plant asset.
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 30
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 31
($36,000 $6,000) 10 = $3,000 $3,000 12 = $250 $250 3 = $750 $20,000 + $750 = $20,750
2002 Prentice Hall, Inc. Business Publishing Accounting, 5/E Horngren/Harrison/Bamber 10 - 33
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 34
Equipment (new) $39,250 Accumulated Depreciation (old) $20,750 Equipment (old) Cash
$36,000 $24,000
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 38
Objective 5
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 39
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 40
Objective 6
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 41
Intangible Assets
Not physical in nature Patents Copyrights Trademarks Franchises Leaseholds Goodwill
2002 Prentice Hall, Inc. Business Publishing Accounting, 5/E Horngren/Harrison/Bamber 10 - 42
170,000
170,000
34,000
10 - 44
Horngren/Harrison/Bamber
Literary compositions (novels) Musical compositions Films (movies) Software Other works of art
2002 Prentice Hall, Inc. Business Publishing Accounting, 5/E Horngren/Harrison/Bamber 10 - 45
Trademarks, Trade Names, or Brand Names are assets that represent distinctive identifications of a product or service.
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 46
Franchises are privileges granted by private business or government to sell a product or service.
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 47
Accounting, 5/E
Special Issues
End of Chapter 10
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
10 - 50