ACC 211 Lecture 9: CHAPTER 8

• School: University of Miami
• Department: Accounting Business Administration
• Course: ACC 211
• Professor: Levine Seth

Document Summary

Insufficient capacity results in lost sales: costly excess capacity reduces profits. Tangible assets: physical substance, land, building, fixtures, equipment, natural resources. Intangible assets: no physical substance, patents (20 year life, licenses, copyrights, trademarks, franchises. Fixed asset turnover (fat: net sales or operating expenses/average net fixed assets, measures sales dollars generated by each dollar of fixed assets used, high rate= effective management. Acquisition costs: purchase price, sales taxes, transportation costs, legal/realty fees, installation costs. Asset cost includes: all materials and labor traceable to the construction, a reasonable amount of overhead. Interest on debt incurred during construction: building. Nature of intangible assets: noncurrent assets without physical substance. Amortization: definite life, amortized over short of economic/legal life, straight-line method. Goodwill: occurs when one company buys another, equals amount by which purchase price exceeds fair market value of net assets acquired, not amortized but reviewed annually for impairment.