MGAB01H3 Chapter 9: Chapter 9 notes

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lavenderdonkey6

9 Jan 2011

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Chapter 9 reporting and analyzing long-lived assets notes. Determining the cost of property, plant, and equipment. Ppe are often subdivided into four classes: land, land improvements, buildings, equipment. Obsolescence is the process by which an asset becomes out of date before it physically wears out. Frequently, lease terms allow party using the asset (lessee) to exchange the asset for a more modern or technologically capable asset if it becomes outdated. This is much easier than trying to sell an obsolete asset. www. notesolution. com: 100% financing. If a company borrows to purchase an asset, it is usually required to make a down payment of at least 20%. Leasing an asset does not require any money down, which helps to conserve cash. In addition, interest payments are often fixed for the term of the lease, unlike other financing which often has a floating interest rate.

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Techtronics is a leader in manufacturing computer chips, which is very capital-intensive. Because the production processes in computer chip manufacturing require sophisticated and rapidly changing technology, production and manufacturing assets in the chip industry tend to have relatively short useful lives. The following summary information relates to Techtronicsâ property, plant, and equipment for 2009 and 2010:

Techtronics (amounts in millions) 2009 2010

Property, Plant, and Equipment, at cost $ 46,052 $ 48,088

Accumulated Depreciation $(29,134) $(30,544)

Property, Plant, and Equipment, net $ 16,918 $ 17,544

Depreciation Expense $ 4,360 (2010 only)

Capital Expenditures, net $ 5,200 (2010 only)

Required Assume that Techtronics depreciates all property, plant, and equipment using the straight-line depreciation method and zero salvage value. Assume that Intel spends $6,000 on new depreciable assets in Year 1 and does not sell or retire any property, plant, and equipment during Year 1. a. Compute the average useful life that Techtronics used for depreciation in 2010. b. Project total depreciation expense for Year 1 using the following steps: (i) project depreciation expense for Year 1 on existing property, plant, and equipment at the end of 2010; (ii) project depreciation expense on capital expenditures in Year 1 assuming that Intel takes a full year of depreciation in the first year of service; and (iii) sum the results of (i) and (ii) to obtain total depreciation expense for Year 1. c. Project the Year 1 ending balance in property, plant, and equipment, both at cost and net of accumulated depreciation.

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oliveelephant963

Property, plant, and equipment is normally audited in adifferent manner than current asset accounts. Why is this so?Discuss the differences in how property, plant, and equipment isaudited compared to current assets.

purpleweasel693

The classified balance sheet will show which asset subsections?

a. current assets and other equity

b. current liabilities and short-term assets

c. other revenues and property, plant, and equipment

d. current assets and property, plant, and equipment

pinkserval812

MGAB01H3 Chapter 9: Chapter 9 notes

MGAB01H3 Full Course Notes

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