ADMN 2021H Lecture Notes - Lecture 2: Asset Turnover, Income Statement, Profit Margin
28 Jun 2018
School
Department
Course
Professor
ADMN2021H: Financial Accounting II
Tuesday, January 16th, 2018 – Lecture 2
Study Objectives
1. Account for the Derecognition of property, plant and equipment
2. Identify the basic accounting issues for intangible assets and goodwill
3. Illustrate how long-lived assets are reported in the financial statements
4. Describe the methods for evaluating the use of assets
Derecognition of Property, Plant and Equipment
1. Update depreciation
-Depreciation for the fraction of the year to the date of the disposal must be recorded
Depreciation Expense
Accumulated Depreciation
2. Calculate carrying amount
-Carrying amount = cost – accumulated depreciation
3. Calculate gain or loss
-Proceeds – carrying amount = gain/loss
Proceeds > carrying amount = gain (cr.)
Proceeds < carrying amount = loss (dr.)
4. Record disposal
Cash xxx
Accumulated Depreciation xxx
Loss on Disposal xxx
Asset xxx
Or
Cash xxx
Accumulated Depreciation xxx
Asset xxx
Gain on Disposal xxx
Intangible Assets and Goodwill
Do not have physical substance
Rights, privileges and/or competitive advantages
Must be identifiable
Accounting for Intangible Assets
Accounting for intangible assets parallels accounting for tangible assets
oRecorded at cost including all costs to make asset ready for use
If tangible asset has a finite (limited) life, its cost must be systematically allocated over its useful life
oFor intangible assets, this is referred to as amortization rather than depreciation
Intangible assets with an indefinite (unlimited) life are not amortized
If you cannot receive a benefit from an asset, it is intangible
Amortization for Intangibles
Amortize over shorter of
find more resources at oneclass.com
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Document Summary
Study objectives: account for the derecognition of property, plant and equipment. Identify the basic accounting issues for intangible assets and goodwill. Illustrate how long-lived assets are reported in the financial statements. 3: describe the methods for evaluating the use of assets. Derecognition of property, plant and equipment: update depreciation. Depreciation for the fraction of the year to the date of the disposal must be recorded. Carrying amount = cost accumulated depreciation: calculate gain or loss. Proceeds < carrying amount = loss (dr. : record disposal. Gain on disposal xxx xxx xxx xxx xxx xxx xxx xxx. Accounting for intangible assets parallels accounting for tangible assets: recorded at cost including all costs to make asset ready for use. If tangible asset has a finite (limited) life, its cost must be systematically allocated over its useful life: for intangible assets, this is referred to as amortization rather than depreciation. Intangible assets with an indefinite (unlimited) life are not amortized.
