1. PRINCIPLES OF FINANCIAL ACCOUNTING Chapter 9

2. Plant assets Three characteristics: Physical substance Used in the operations of the business Not intended for resale Cost principle Cost assigned to asset is all expenditures necessary to acquire the asset and make it ready for its intended use.

3. Types of expenditures Capital expenditures – assets Revenue expenditures - expenses

4. Depreciation The systematic, rational, allocation of the cost of a plant asset over its useful life. Recognizing depreciation for an asset does not result in the accumulation of cash for replacement of the asset.

5. Factors in computing depr. Cost Useful Life Salvage Value Method: Straight-line Declining-balance method Units of Activity method MACRS

6. Issues during use of assets Ordinary repairs Additions Improvements Permanent impairment

7. Disposal of assets Sale Cost – Accumulated Depr.=Book Value Selling price – Book value=Gain or Loss Retirement or throwing away Any remaining book value is reported as a loss

8. Intangibles Characteristics: Lack physical substance Have a long-life Used in operations Amortize their cost over useful life. Research and development is expensed when incurred.

9. Assignment E 9-3 E 9-4 E 9-5 E 9-11 P 9-1A BYP 9-1 BYP 9-10