Acc chapter 7

Copyright

a document granting exclusive right to publish and sell literary or musical or artistic work for life + 70 years; Purchase price + legal and filing fees

Construction Costs

architect fees + material costs + construction labor + officer supervision + overhead + capitalized interest

legal defense of intangible assets

capitalize if win because future benefit, expense if fail because no future benefit

long term assets

tangible and intangible assets

Patent

exclusive right to manufacturing a product; debit R&D expenses, credit cash

recurring costs of equipment

expense them as we incur them, to match them with revenues generated during the same period; this is repairs and maintenance expense.

create an intangible assets

expenses intangible assets on income statement NOT balance sheet; benefits future; U.S. Acc Rules firms to expense all intangible costs as incurred; Purchase price + legal and filing fees

Land

indefinite life, no depreciation

record the costs of a franchise

initial fee is recorded an an Intangible asset; expenses that cost over the life of the franchise agreement, addition service charges paid periodically are also recorded as an expense; all this is recorded under franchisee costs/expenses in the income statement

Capitalized interest

interest on asset loan is an asset not an expense; interest is similar to material,labor, overhead costs

tangible assets

land, land improvements, buildings, equipment, and natural resources

Materiality

large enough to influence a decision, depending on cost, less than 1000 = expense, more than 1000 = capitalize

Land improvements

limited life, subject to depreciation

natural resources sustainability

meeting needs in present with regard to future needs

intangible assets

patents, trademarks,copyrights,franchises, and good will

purchases of intangible assets

purchase cost + legal and filing fees + other costs

expenditure after acqusition

repairs/maintenance,improvements(replacing a major component),additions etc; debit asset or expense? Capitalize if it benefits future, expense if it is for current period;

Goodwill

reputation, trained employees, management team, business location, things that can not be recorded as an asset;Only recorded during acquisition not internally created; Good will = purchase price - fair value of the net assets(fair value of all identifiable assets acquired - all liabilities assumes)

Trademark

A brand that has exclusive legal protection for both its brand name and its design, acquisition, expense advertising costs for trademarks in income statement NOT balance sheet; can only report legal, registration,design costs Not advertising expense which is part of the estimated value.

Equipment

Machinery, Manufacturing, Computers, Office Equipment, Vehicles, Furniture, Fixtures

Capitalized Costs

Purchase Price + Closing Costs(fees,commissions,title,back taxes)

Building's Acquisition cost

Purchase Price + Realtor Commissions + Legal Fees + (Modification/Remodelling Costs)

Cost of Equipment

Purchase Price + other costs (sales tax,shipping charges,installation,testing,legal fees,shipping insurance not liability insurance)

capitalize

Record an expenditure as an asset, choose whether a cost is an expense or long-term asset

basket purchase allocation

allocate total allocated by (estimated fair value/total fair value) * basket purchase price

Depreciation

allocating to an expense the cost of an asset over its service life; asset cost/years of benefit

filing fees

fee to record a copyright, fee to record a patent