chapter 8 slides Flashcards
examples of long lived assers
-property
-land
-patents
-goodwill
-copyrights
-startup cost
what are two choices you have with expenditures
-capitalize
-expense
whats it mean to capitilize expenditure
means to make it an asset (rather than an expense)
whats it mean to expense expenditure
means to make it an expense (rather than an asset)
example of capital expenditure
Truck (asset). DR 5000
Cash CR 5000
example of an expense
maintenance expense DR 5000
Cash CR 5000
how long will expenditure be useful? If longer than a year you…..
capitalize
how long will expenditure be useful? if used up during the current year you…..
expense
if the expenditure simply enables another asset to continue operating as originally intended, what do you do with it
repair expense
if the expenditure enables anoyher asset to operate much longer than originally intended or to operate at an improved level what do you do
capitalize as a new asset
what are assets
things that last over a year like buildings
if amount of the expenditure could materially affect somones opinion of the company you should
be very careful about your decision
if it does not matter what you do with expenditure materially then
you can probably just expense the item
do you capitalize or expense if your company just bought an office building
capitalize (long term)
your company repaints your office. Capitalize or expense?
expense - you do not really need it
tagible assets are depreciated or no
yes depreciated
when do you expense a tangible asset
when it is being used
tangible asset is all what
an estimate
what do you save on with declining balance depreciation
on taxes
various methods of recording tangible assets depreciating
-striaght line
-declining balance
-sum of years digits
-units of production
-MACRS (tax)
striaght line depreciation formula (will be on test)
[cost - salvage value]/life … (prorated for the number of months in the year)
asset turnover ratio
net sales/ average total assets
what is asset turnover ratio
number of sales dollars per dollar of assets
