ACC 100 Chapter Notes - Chapter 8: Intangible Asset, Financial Instrument, Accounting Software

88 views5 pages

raspberrymosquito892

13 Jun 2018

School

Department

Course

Professor

For unlimited access to Textbook Notes, a Class+ subscription is required.

ACC100 – Week 9

Long-Lived Assets

Difference between supplies and equipment

- supplies are used in a short period of time (less than 1 year)

-equipment is used for many years so it is a long lived asset

Intangible assets

- does not physically exist

- must not be a financial instrument

- grants certain rights to the person who holds them

- ex. copyrights, trademark (nike swoosh), patent, customer list

GOODWILL IS AN INTANGIBLE ASSET

Long-Lived Assets on the Balance sheet

- Tangible assets are grouped ude Popet, Plat ad Euipet, o Fied Asset o

Capital Asset → meaning they are part of the value that a business owns

- if a company does not own property or a plant, equipment would go under capital assets

- intangible assets are listed unde Itagiles

How to determine what a long-lived asset costs

- The cost of long-lived assets, both tangible and intangible assets, is made up of all costs

incurred to buy and make the asset ready for use

- costs such as legal fees to transfer ownership of a piece of land from one business to another

business would be included as part of the cost of the land (capitalized), even though it is not

part of the purchase price

- decide if it is NECESSARY for the use of the equipment or is it just nice to have

EXAMPLE

Description

Cost

Delivery

290

Invoice price

3,000

Maintenance supplies

150

New battery

175

One (1) year insurance policy

600

Painting the body black

100

Repairs to lift bars

320

Servicing/testing

275

find more resources at oneclass.com

Unlock document

This preview shows pages 1-2 of the document.
Unlock all 5 pages and 3 million more documents.

Already have an account? Log in

Assets

Cash

Supplies

Prepaid Insurance

Equipment

Opening

N/A

Trans. 1

-290

290

Trans. 2

-3,000

3,000

Trans. 3

-150

150

Trans. 4

-175

175

Trans. 5

-600

600

Trans. 6

-100

100

Trans. 7

-320

320

Trans. 8

-275

275

N/A

150

600

4,160

How to determine the cost of long-lived assets which are intangible

- review all the costs incurred and assess whether they were either part of the cost of

purchasing the asset or necessary to make it ready for use

- if yes, record cost into long-lived asset account

-The cost of the business license would not be capitalized because, even in a small business, it

would not be considered material (meaning it is therefore immaterial to the decision-making of

the stakeholders). Instead, the $60 would be expensed (Business License Expense or even

Office Expense) as a cost of doing business

How to decide what is material and what is immaterial

- anything less than 5% of total assets is considered immaterial

- ex. Business license is $60, and the company has $8,395.25 in assets

- 60/8395.25=0.71%

- this is less than 1%, so it is not important

- ex. website design costs are $1,700 and their assets are $8,395.25

- this is 20.2%, so it is considered an intangible asset

find more resources at oneclass.com

Unlock document

This preview shows pages 1-2 of the document.
Unlock all 5 pages and 3 million more documents.

Already have an account? Log in

Document Summary

Supplies are used in a short period of time (less than 1 year) Equipment is used for many years so it is a long lived asset. Grants certain rights to the person who holds them. Ex. copyrights, trademark (nike swoosh), patent, customer list. Tangible assets are grouped u(cid:374)de(cid:396) (cid:862)p(cid:396)ope(cid:396)t(cid:455), pla(cid:374)t a(cid:374)d e(cid:395)uip(cid:373)e(cid:374)t(cid:863), o(cid:396) (cid:862)fi(cid:454)ed asset(cid:863) o(cid:396) (cid:862)capital asset(cid:863) meaning they are part of the value that a business owns. If a company does not own property or a plant, equipment would go under capital assets. How to determine what a long-lived asset costs. The cost of long-lived assets, both tangible and intangible assets, is made up of all costs incurred to buy and make the asset ready for use. Decide if it is necessary for the use of the equipment or is it just nice to have. If yes, record cost into long-lived asset account. How to determine the cost of long-lived assets which are intangible.

Related Questions

To analyze the financial statements of a publicly tradedcompany

Obtain an annual report from GM (GENERAL MOTORS YEARS 2013-2014)a publicly traded corporation that is interesting to you. Be surethe company has property and equipment, intangible assets, andlong-term debt on its balance sheet. Using techniques you havelearned in the previous weeks, respond to the followingquestions.

1.What is the amount of property and equipment on the balancesheet for the two most recent years? What is the amount ofdepreciation expense? What amounts are on the cash flow statementfor the most recent year that relate to depreciation, gains andsales of property and equipment, and purchases and sale of propertyof equipment? What amounts are permitted for inclusion in thecapitalized cost of property and equipment?

2. Looking at the footnote disclosures of the company, what arethe individual components of property and equipment? For example,what are the amounts for land, building, equipment, accumulateddepreciation, and so forth? How do companies account fornonmonetary exchange and dispositions of property andequipment?

3.Does the company have intangible assets? If so, what are thetypes of intangible assets (patent, copyrights, etc.) and theiramounts? What is the amount of amortization expense? What amountson the most recent cash flow statement relate to the purchase andsale of intangible assets? How do intangible assets differ fromproperty and equipment? What costs do we include in intangibleassets?

4. Does the company have goodwill? What are the footnotedisclosures relating to goodwill and the related acquisition?Please also describe the calculation of goodwill and how we accountfor differences between fair value and book value of assetsacquired.

5. What are the company's depreciation methods? What is therange of estimated useful lives used for depreciating its assets?Does the company use the same depreciation methods for financialstatements and tax returns? If not, please describe the methodsused for tax purposes.

6.What are the company's footnote disclosures relating toimpairment? Please also describe how to determine whether animpairment exists and how to calculate the impairment loss.

7.What are the amounts and descriptions of the company's currentliabilities for the most recent year? Does the company have anycontingent liabilities? If yes, please describe. What are the threecategories of contingent liabilities and the treatment for eachtype? Does the company have any subsequent events disclosed in itsfootnotes? If so, please describe them.

8. What are the amounts and descriptions for all of thecompany's long-term liabilities on its balance sheet for the twomost recent years? What is the interest expense for the two mostrecent years? What amounts are included in the cash flow statementsfor proceeds from issuance of debt and repayment of debt for themost recent year? For each note payable discussed in the footnotesdisclosures, what is the interest rate, total amount borrowed, andmaturity date?

9.Does the company have bonds payable? If so, what are theamounts? Please also describe how bonds payable differ from notespayable and how to account for the issuance of bonds at par, at adiscount, and at a premium. How is the discount and premiumamortized? What is the effective interest method?

10,Does the company have capital leases? If so, what are theamounts and terms of the leases? What are the four criteria for alease to be considered a capital lease? What are the additionalcriteria for the lessor? What is the difference between asales-type lease and a direct financing lease?

coralmammoth759

To analyze the financial statements of a publicly tradedcompany

Obtain an annual report from a publicly traded corporation thatis interesting to you. Be sure the company has property andequipment, intangible assets, and long-term debt on its balancesheet. Using techniques you have learned in the previous weeks,respond to the following questions.

What is the amount of property and equipment on the balancesheet for the two most recent years? What is the amount ofdepreciation expense? What amounts are on the cash flow statementfor the most recent year that relate to depreciation, gains andsales of property and equipment, and purchases and sale of propertyof equipment? What amounts are permitted for inclusion in thecapitalized cost of property and equipment?

Looking at the footnote disclosures of the company, what are theindividual components of property and equipment? For example, whatare the amounts for land, building, equipment, accumulateddepreciation, and so forth? How do companies account fornonmonetary exchange and dispositions of property andequipment?

Does the company have intangible assets? If so, what are thetypes of intangible assets (patent, copyrights, etc.) and theiramounts? What is the amount of amortization expense? What amountson the most recent cash flow statement relate to the purchase andsale of intangible assets? How do intangible assets differ fromproperty and equipment? What costs do we include in intangibleassets?

Does the company have goodwill? What are the footnotedisclosures relating to goodwill and the related acquisition?Please also describe the calculation of goodwill and how we accountfor differences between fair value and book value of assetsacquired.

What are the company's depreciation methods? What is the rangeof estimated useful lives used for depreciating its assets? Doesthe company use the same depreciation methods for financialstatements and tax returns? If not, please describe the methodsused for tax purposes.

What are the company's footnote disclosures relating toimpairment? Please also describe how to determine whether animpairment exists and how to calculate the impairment loss.

What are the amounts and descriptions of the company's currentliabilities for the most recent year? Does the company have anycontingent liabilities? If yes, please describe. What are the threecategories of contingent liabilities and the treatment for eachtype? Does the company have any subsequent events disclosed in itsfootnotes? If so, please describe them.

What are the amounts and descriptions for all of the company'slong-term liabilities on its balance sheet for the two most recentyears? What is the interest expense for the two most recent years?What amounts are included in the cash flow statements for proceedsfrom issuance of debt and repayment of debt for the most recentyear? For each note payable discussed in the footnotes disclosures,what is the interest rate, total amount borrowed, and maturitydate?

Does the company have bonds payable? If so, what are theamounts? Please also describe how bonds payable differ from notespayable and how to account for the issuance of bonds at par, at adiscount, and at a premium. How is the discount and premiumamortized? What is the effective interest method?

Does the company have capital leases? If so, what are theamounts and terms of the leases? What are the four criteria for alease to be considered a capital lease? What are the additionalcriteria for the lessor? What is the difference between asales-type lease and a direct financing lease?

Prepare a multiple-step income statement for the year endedDecember 31, 2016, concluding with earnings per share. In computingearnings per share, assume that the average number of common sharesoutstanding was 100,000 and preferred dividends were $100,000.(Round earnings per share to the nearest cent.)

â¢

Refer to the Chart of Accounts for exact wording of accounttitles.

â¢

Refer to the Labels and Amount Descriptions for exact wording oftext entries.

Prepare a retained earnings statement for the year endedDecember 31, 2016.

â¢	Refer to the Chart of Accounts for exact wording of accounttitles.
â¢	Refer to the Labels and Amount Descriptions for exact wordingof text entries.
â¢	You will need to enter the word âLessâ or âAddâ asnecessary.

Prepare a balance sheet in report form as of December 31, 2016.You are not required to present the details of Preferred and CommonStock (i.e., number of shares authorized, issued and outstanding).

â¢	Refer to the Chart of Accounts for exact wording of accounttitles.
â¢	Refer to the Labels and Amount Descriptions for exact wordingof text entries.
â¢	âLessâ , âDeductâ, âAddâ and colons will appearautomatically.
â¢	Available-for-sale investments should be reported as a singleasset on the balance sheet, regardless of how many accounts existin the ledger for such assets.
â¢	Recall that current assets are to be reported in order ofliquidity. Available-for-sale investments are considered to be moreliquid that accounts receivable.
â¢	Report fixed assets and paid-in capital accounts inaccount-number order.
â¢	Omit the description of bonds and stocks (i.e., percentagerates, due date, number of shares, etc.)
â¢	Enter all amounts as positive numbers, with one exception: Ifan unrealized loss has occurred, it must be reported as a negativeamount on the balance sheet.

Labels

In CengageNOW, a Label is a text entry that does not have anamount associated with it.

Current assets

Current liabilities

December 31, 2016

For the Year Ended December 31, 2016

Intangible assets

Investments

Less dividends

Long-term liabilities

Operating expenses

Other income and expenses

Paid-in capital

Add dividends

Property, plant, and equipment

Amount Descriptions

In CengageNOW, an Amount Description is a text entry other thanan Account that has an amount associated with it.

Available-for-sale investments

Decrease in retained earnings

Excess of issue price over par

Gross profit

Income before income tax

Income from operations

Increase in retained earnings

Miscellaneous selling expense

Net income

Net loss

Retained earnings, January 1, 2016

Retained earnings, December 31, 2016

Sales commissions

Sales salaries expense

Store supplies expense

Total administrative expenses

Total assets

Total (before treasury stock)

Total current assets

Total current liabilities

Total liabilities

Total liabilities and stockholdersâ equity

Total long-term liabilities

Total investments

Total operating expenses

Total paid-in capital

Total property, plant, and equipment

Total selling expenses

Total stockholdersâ equity

Unamortized premium

Unamortized discount

Income Statement data:
Advertising expense	$ 150,000
Cost of merchandise sold	3,700,000
Delivery expense	30,000
Depreciation expense-office buildings and equipment	30,000
Depreciation expense-store buildings and equipment	100,000
Dividend revenue	4,500
Gain on sale of investments	4,980
Income from Pinkberry Co. investment	76,800
Income tax expense	140,500
Interest expense	21,000
Interest revenue	2,720
Miscellaneous administrative expense	7,500
Miscellaneous selling expense	14,000
Office rent expense	50,000
Office salaries expense	170,000
Office supplies expense	10,000
Sales	5,254,000
Sales commissions	185,000
Sales salaries expense	385,000
Store supplies expense	21,000

Retained earnings and balance sheet data:
Accounts payable	$ 194,300
Accounts receivable	545,000
Accumulated depreciationâoffice buildings and equipment	1,580,000
Accumulated depreciationâstore buildings and equipment	4,126,000
Allowance for doubtful accounts	8,450
Available-for-sale investments (at cost)	260,130
Bonds payable, 5%, due 2024	500,000
Cash	246,000
Common stock, $20 par
(400,000 shares authorized; 100,000 shares issued, 94,600outstanding)	2,000,000
Dividends:
Cash dividends for common stock	155,120
Cash dividends for preferred stock	100,000
Goodwill	500,000
Income tax payable	44,000
Interest receivable	1,125
Investment in Pinkberry Co. stock (equity method)	1,009,300
Investment in Dream Inc. bonds (long term)	90,000
Merchandise inventory (December 31, 2016),
at lower of cost (FIFO) or market	778,000
Office buildings and equipment	4,320,000
Paid-in capital from sale of treasury stock	13,000
Excess of issue price over par:
-Common	886,800
-Preferred	150,000
Preferred 5% stock, $80 par
(30,000 shares authorized; 20,000 shares issued)	1,600,000
Premium on bonds payable	19,000
Prepaid expenses	27,400
Retained earnings, January 1, 2016	9,319,725
Store buildings and equipment	12,560,000
Treasury stock
(5,400 shares of common stock at cost of $33 per share)	178,200
Unrealized gain (loss) on available-for-sale investments	(6,500)
Valuation allowance for available-for-sale investments	(6,500)

none

Chart of Accounts

CHART OF ACCOUNTS

Equinox Products Inc.

General Ledger

	ASSETS
110	Cash
121	Accounts Receivable
122	Allowance for Doubtful Accounts
131	Merchandise Inventory
132	Interest Receivable
133	Prepaid Expenses
141	Investments-Solstice Corp.
142	Investment in Pinkberry Co. Stock
143	Investment in Dream Inc. Bonds
144	Valuation Allowance for Available-for-Sale Investments
181	Store Buildings and Equipment
182	Accumulated Depreciation-Store Buildings and Equipment
183	Office Buildings and Equipment
184	Accumulated Depreciation-Office Buildings and Equipment
191	Goodwill

	LIABILITIES
211	Accounts Payable
221	Income Tax Payable
225	Cash Dividends Payable
251	Bonds Payable
252	Discount on Bonds Payable
253	Premium on Bonds Payable

	EQUITY
311	Preferred Stock
312	Paid-in Capital in Excess of Par-Preferred Stock
321	Common Stock
322	Paid-in Capital in Excess of Par-Common Stock
331	Retained Earnings
341	Cash Dividends
351	Treasury Stock
352	Paid-in Capital from Sale of Treasury Stock
361	Unrealized Gain (Loss) on Available-for-Sale Investments

	REVENUE
410	Sales
611	Dividend Revenue
621	Interest Revenue
631	Income from Pinkberry Co.
641	Gain on Sale of Investments

	EXPENSES
511	Cost of Merchandise Sold
512	Bad Debt Expense
520	Sales Salaries Expense
521	Sales Commissions
522	Office Salaries Expense
531	Advertising Expense
532	Delivery Expense
537	Store Supplies Expense
538	Office Supplies Expense
539	Office Rent Expense
541	Income Tax Expense
551	Depreciation Expense-Store Equipment
552	Depreciation Expense-Office Equipment
591	Miscellaneous Selling Expense
592	Miscellaneous Administrative Expense
710	Interest Expense
731	Loss on Sale of Investments

none

Labels and Amount Descriptions

Labels In CengageNOW, a Label is a text entry that does not have anamount associated with it.
Current assets
Current liabilities
December 31, 2016
For the Year Ended December 31, 2016
Intangible assets
Investments
Less dividends
Long-term liabilities
Operating expenses
Other income and expenses
Paid-in capital
Add dividends
Property, plant, and equipment
Amount Descriptions In CengageNOW, an Amount Description is a text entry other thanan Account that has an amount associated with it.
Available-for-sale investments
Decrease in retained earnings
Excess of issue price over par
Gross profit
Income before income tax
Income from operations
Increase in retained earnings
Miscellaneous selling expense
Net income
Net loss
Retained earnings, January 1, 2016
Retained earnings, December 31, 2016
Sales commissions
Sales salaries expense
Store supplies expense
Total administrative expenses
Total assets
Total (before treasury stock)
Total current assets
Total current liabilities
Total liabilities
Total liabilities and stockholdersâ equity
Total long-term liabilities
Total investments
Total operating expenses
Total paid-in capital
Total property, plant, and equipment
Total selling expenses
Total stockholdersâ equity
Unamortized premium
Unamortized discount

copperwombat133

ACC 100 Chapter Notes - Chapter 8: Intangible Asset, Financial Instrument, Accounting Software

Document Summary

Get access

Related Documents

ACC 100 Lecture Notes - Lecture 8: Income Statement, Financial Statement, Book Value

ACC 100 Lecture Notes - Lecture 8: Accounts Payable, Retained Earnings, Operating Expense

ACC 100 Chapter Notes - Chapter 8: Intangible Asset, Kijiji, Financial Statement

Related Questions