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ACCTG 215 Notes 2-16

by: Shogo Okuda

ACCTG 215 Notes 2-16 ACCTG 215

Shogo Okuda
GPA 3.97
Introduction to Accounting and Financial Reporting

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Introduction to Accounting and Financial Reporting
One Day of Notes
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This 2 page One Day of Notes was uploaded by Shogo Okuda on Tuesday October 28, 2014. The One Day of Notes belongs to ACCTG 215 at University of Washington taught by Wells in Winter2010. Since its upload, it has received 46 views. For similar materials see Introduction to Accounting and Financial Reporting in Accounting at University of Washington.

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Date Created: 10/28/14
ACCTG 215 Notes 216 Long Term Assets 1 Property plant and equipment 2 Intangible assets patents trademarks copyrights franchises and goodwill Record longterm asset cost plus all expenditures necessary to get the asset ready for use Land land purchased for investment purposes is recorded in a separate investment account Cash received from the sale of salvaged materials reduces the total cost of land Land improvements record separately from the land itself bc unlike land these assets are subject to depreciation Capitalized interest interest costs we add to the asset account rather than recording them as interest expense We record purchased intangible assets at their original cost plus all other costs such as legal and ling fees necessary to get the asset ready for use We expense most of the costs for internally developed intangible assets to the income statement as we incur them Current US accounting rules require rms to expense all research and development costs as incurred IFRS allows it to be an intangible asset for current period only Patent exclusive right to manufacture a product or to use a process period of 20 yrs add any attorney fees and other costs to successfully defending the patent to patent account Copyright exclusive right of protection given to the creator of a published work such as a song lm painting photograph book or computer software Trademark word slogan or symbol that distinctively identi es a company product or service Advertising fee expensed Only legal registration and design fees are recorded to the trademark account Franchises record the initial fee as an intangible asset and then expense it over the life of the franchise agreement We record goodwill as in intangible asset in the BS only when we purchase it as part of the acquisition of another company p acquiring company records goodwill equal to the purchase price less the fair value of the net assets acquired We capitalize expenditure as an asset if it increases future bene ts whereas we expense expenditure if it bene ts only the current period Repairs and maintenance Current expense Future capitalize Addition capitalize Improvement capitalize Legal defense of intangible assets Successful capitalize Unsuccessful expense Depreciation process of allocating to an expense the cost of an asset over its service life Accumulated depreciation Book Value original cost of the asset minus the current balance in accumulated depreciation Residual Value salvage value amount the company expects to receive from selling the asset at the end of its service life Straight line method allocate an equal amount of the allocation base to each year of the asset s service life Accelerated depreciation method higher depreciation in the earlier years of the asset s life and lower depreciation in later years Decliningbalance method accelerated depreciation method higher than straight line depreciation in earlier years but lower in later years Both declining balance and straight line will result in the same total depreciation over the asset s service life Activity based method allocate an asset s cost based on its use Straight line produces a higher net income than accelerated methods MACRS for tax reporting Amortization allocating the cost of intangible assets Intangible assets With an inde nite useful life are not amortized Sale VS retirement VS exchange Impairment occurs when the future cash flows generated for a long term asset fall below its book Value Record an impairment only when book Value exceeds both future cash flows and fair Value Big bath recording all losses in one year to make a bad year even Worse Impairment 2 step process 1 Test for impairment the long term asset is impaired if future cash flows are less than book Value 2 If impaired record impairment loss the impairment loss is the amount by which book Value exceeds fair Value


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