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Flashcards in Fixed Assets Deck (15):

They are expensed in the period incurred and are not capitalized.

Fixed Assets


All expenditures to get the building into working condition are ready for use

Fixed Assets


All expenditures to get the land ready for its intended use:

Title & County Fees

Clearing of Land - Dirt work etc.

Demolition and removal of old buildings (minus any scrap or salvage)

Note: capitalized land costs are not depreciated

Fixed Assets


If the cash flows from the assets exchanged are not significantly different no gain or loss is recognized on a non-monetary exchange as it lacks commercial substance.

The new asset is recorded at the book value of the asset given up.

The only gain that can be recognized is any boot (cash) received.

Fixed Assets


If resulting cash flows are significantly different then the transaction has commercial substance and a gain/loss is recorded on the exchange.

The new asset is recorded at the FAIR VALUE of the assets given up unless the asset acquired has a fair value that is easier to determine.

Fixed Assets


Recorded at Fair Value + costs associated with getting the property into working condition for its designed purpose

Exam Tip - Think of a charity holding afair and then donating the property which is then recorded atfair value

Fixed Assets


Recorded at Fair Value of asset given up.

Gain or Loss is recorded.

Fixed Assets


1 / (Useful Life x 2 x Book Value)

Ignore salvage value.

Fixed Assets


(Cost - Salvage Value) x (Remaining Useful Life / SYD) : Depreciation expense

For example the depreciation factor for the third year of a 10-year asset would be:

: 8 / (10+9+8+7+6+5+4+3+2+1) : 8/55 : 14.5%

Remaining useful life : 8 SYD : 55

Fixed Assets


(Cost - Salvage Value) / Useful life : depreciation expense

Fixed Assets


When the un-discounted future cash flows are less than the carrying value of the asset.

Carrying Value - Fair Value : Impairment Loss

Note: impaired assets that recover their value can't be written back up once written down

Fixed Assets


If the patent is SUCCESSFULLY defended the legal fees are amortized over the patent's economic life.

If unsuccessful they are expensed immediately.

Fixed Assets


Compare the CV to the FV. If FV is greater than CV no impairment exists you're done.

If impairment appears to exist the assets and liabilities should be compared to the total value of the reporting unit. The difference is Goodwill. Compare this amount to the CV of the Goodwill and write it down accordingly.

Fixed Assets


Expenses prior to technological feasibility are expensed as R&D.

After technological feasibility but prior to production costs are capitalized.

Expenses incurred during production are charged to inventory.

Expenses incurred training on internal use software are expensed.

Fixed Assets


All expenditures to get the asset into working condition and ready for use:

Purchase price + liabilities assumed
Legal fees
Construction loan interest

Any alterations to existing facilities or equipment necessary for the new purchase and installation that extend the life or increase the efficiency of these assets are capitalized.

Fixed Assets