Textbook Notes (270,000)
CA (160,000)
Western (10,000)
2257 (100)
Chapter

Business Administration 2257 Chapter Notes -Westjet, Fixed Asset


Department
Business Administration
Course Code
Business Administration 2257
Professor
Jason Dean

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CHAPTER 9 – REPORTING AND INTERPRETING PROPERTY, PLANT, AND
EQUIPMENT; NATURAL RESOURCES; AND INTANGIBLES
WESTJET AIRLINES
Long-term asset: Also long-lived assets or capital assets. Tangible and intangible
resources owned by a business and used in its operations over several years.
1. Tangible assets. Physical substance. Property, plant and equipment. Three kinds:
a. Land. If it has material value separate item on balance sheet. Never
amortized.
b. Buildings, fixtures, and equipment. Reported as separate item on balance
sheet/in notes.
c. Natural resources.
2. Intangible assets. No physical substance. Often arise from intellectual effort and are
known as intellectual property. Ex: copyrights, patents, software, franchises.
Fixed asset turnover ratio used for answering the question: how effectively is
management utilizing its property, plant and equipment or fixed assets to generate
revenue? High rate usually = effective management.
Fixed asset turnover = Net sales (or operating revenue)
Average Net Fixed Assets
Costs are capitalized when they are recorded as assets instead of as expenses in the
current period.
Acquisition cost: Net cash equivalent amount paid or to be paid for the asset.
Acquisition methods:
For cash
For debt
For equity
By construction
As a basket purchase of assets
Capitalized interest: Represents interest on borrowed funds directly attributable to
construction until the asset is substantially complete.
Basket purchase: An acquisition of two or more assets in a single transaction for a single
lump sum.
Expenditures made after an asset is acquired:
1. Ordinary repairs and maintenance:
Expenditures for normal operating upkeep of long-term assets.
Recorded as an expense.
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