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