ACTG 2011 Lecture Notes - Lecture 1: Income Statement, Financial Statement, Intangible Asset
Document Summary
Financial reporting objectives tax minimization, stewardship, management evaluation, earnings management, cash flow prediction, etc. Acquisition cost of an asset includes the purchase price as well as all costs necessary to get the asset in place and ready for its intended use. We record the purchase price net of any cash discounts taken. Finance charges are not included in the cost of an asset. If we elect to finance the purchase over a period of time, the interest cost is charged as an expense when incurred. Recording acquisition costs as assets is referred to as capitalizing the costs. In addition to the purchase price of a building, the acquisition cost includes legal fees, realty fees, title fees, and renovation and repair costs necessary to get the building ready for its intended use. Equipment is recorded at its purchase price less any available cash discounts.
