ACCT-240 Chapter Notes - Chapter 8: Intangible Asset, Fixed Asset, Financial Statement

• School: American University
• Department: Accounting And Taxation
• Course: ACCT-240
• Professor: Darlene Suprenant

Document Summary

Reporting and interpreting property, plant and equipment; natural resources; and. One of the most difficult tasks is to predicting long-term productive capacity. Underestimate = not produce enough to meet demand = missed revenue. All necessary expenditures made in acquiring and preparing an asset should be recorded as cost of the asset. When they are recorded as part of the cost of an asset and not as expenses in the period. Sales taxes, fees, transportation costs, installation costs are added to the purchase price of the asset. Discounts are subtracted and interests are expensed as incurred. Net cash amount paid for the asset or the fair value of the asset (cash equivalent price) When building instead of purchasing an asset, the cost includes labor, materials and a portion of the interest incurred during the construction period. Interest incurred during the construction period = capitalized interest. Amount of interest expense capitalized is recorded by debiting a and crediting cash when paid.