BUS 251 Chapter Notes - Chapter 8: Historical Cost, Interest Expense, Capital Asset

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 251
• Professor: Wing Him Yeung

Document Summary

Companies usually need some infrastructure to carry out their day-to-day operations, such as buildings, equipment, vehicles, and land. Usually acquired and held for use in operations and long-term in nature. Meet the definition of assets: have probable future value. Future value is represented by the cash that will eventually be received from the sales of products and services. Capital assets are used until the company decides to replace them with a new asset o o. The owner has the right to use them. The right is acquired through a past transaction. Historical cost: changes in the asset"s market value are ignored, recognizes a gain or loss on the sale. Determines by the difference between the proceeds from the sale and the net book value (carry value/depreciation cost) As asset is used, its carrying value is adjusted upward or downward to reflect changes in the replacement cost (unrealized gains and losses) If the replacement cost goes up, depreciation expense also rises.