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Chapter 8

Chapter 8 - ACC100 - Capital Assets, PPE, natural resources and Intangible Assets.docx

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Ryerson University
ACC 100
Cheryl Dyson

ACC100 Chapter 8 Textbook Notes Nov 10, 13  Acquisition Cost: Original Cost, cost to acquire asset. Includes: o Purchase price o Taxes paid at time of purchase (ex: sales tax) o Transportation charges o Installation costs  Acquisition costs should not include expenditures unrelated to acquisitions (repair damages) and costs incurred after installation Group Purchase  Usually, companies buy several assets which in most cases is land and the building situated within it  The purchase price should be allocated between land and building based on proportion of their fair market values Capitalization of Interest  Interest on constructed assets is added to the asset account (Ex: borrowing money to finance construction, interest wouldn’t be considered an expense)  The amount of interest that is capitalized (treated as asset) is based on average accumulated expenditures. Land Improvements  Costs that are related to land but have a limited life 3 methods of Depreciation: straight line, units-of-production, and accelerate methods Straight Line  Method of depreciation where costs of an asset are allocated evenly over time  Book Value: The original cost of the asset minus the accumulated depreciation  The straight line method attracts through its ease and simplicity Units-of-production method  Depreciation is determined as a function of the number of units the asset produces  Depreciation per Unit = (acquisition Cost – Residual Value) / Total Number of Unit
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