Business Administration 2257 Chapter Notes -Westjet, Web Development

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Published on 16 Nov 2011
School
Western University
Department
Business Administration
Course
Business Administration 2257
Professor
CHAPTER 9 (PART II) – REPORTING AND INTERPRETING PROPERTY,
PLANT, AND EQUIPMENT; NATURAL RESOURCES; AND INTANGIBLES
WESTJET AIRLINES
Impairment: Occurs when events or change circumstances cause the book value of long-
term assets to exceed their fair value, such as a significant decrease in its market price.
If net book value > fair value, then the asset is impaired.
Fair value: The amount at which an asset can be bought or sold between two willing
parties. Can be determined based on quoted market prices.
Impairment loss = Net book value – Fair value
The disposal of an amortizable asset usually requires two entries:
1. An adjusting entry to update the amortization expense and accumulated
amortization accounts.
2. An entry to record the disposal.
Net book value = Original cost – Accumulated amortization
Natural resources often called wasting assets, because they are depleted.
Depletion: The systematic and rational allocation of the cost of a natural resource over
the period of exploitation.
Intangible assets with indefinite lives are not amortized.
Goodwill: The excess if the purchase price of a business over the market value of the
business’s identifiable assets and liabilities.
The only way to report goodwill as an asset is to purchase another business.
Trademark: An exclusive legal right to use a special name, image, or slogan.
Patent: Granted by the federal government for an invention; it is an exclusive right given
to the owner to use, manufacture, and sell the subject of the patent.
Copyright: The exclusive right to publish, use, and sell a literary, musical, or artistic
work.
Franchise: A contractual right to sell certain products or services, use certain trademarks,
or perform activities in a geographical region.
Technology: Includes costs for computer software and Web development.
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Document Summary

Chapter 9 (part ii) reporting and interpreting property, Impairment: occurs when events or change circumstances cause the book value of long- term assets to exceed their fair value, such as a significant decrease in its market price. If net book value > fair value, then the asset is impaired. Fair value: the amount at which an asset can be bought or sold between two willing parties. Can be determined based on quoted market prices. Impairment loss = net book value fair value. The disposal of an amortizable asset usually requires two entries: an adjusting entry to update the amortization expense and accumulated amortization accounts, an entry to record the disposal. Net book value = original cost accumulated amortization. Natural resources often called wasting assets, because they are depleted. Depletion: the systematic and rational allocation of the cost of a natural resource over the period of exploitation. Intangible assets with indefinite lives are not amortized.

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