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Accounting for LongTerm
Operational Assets
Chapter 06
McGrawHill/Irwin Copyright © 2012 by The McGrawHill Companies, Inc. All rights reserved.
6-2
Learning Objectives 1. Identify different types of long-term operational assets. 2. Determine the cost of long-term operational assets.
3. Explain how different depreciation methods affect financial statements.
4. Determine how gains and losses on disposals of long-term operational assets affect financial statements.
5. Show how revising estimates affects financial statements.
6. Explain how continuing expenditures for operational assets affect financial statements.
7. Explain how expense recognition for natural resources (depletion) affects financial statements.
8. Explain how expense recognition for intangible assets (amortization) affects financial statements.
9. Explain how expense recognition choices and industry characteristics affect financial performance measures.
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Tangible versus Intangible Assets
Tangible assets have a physical presence; they can be seen and touched. Intangible assets are rights or privileges. They cannot be seen or touched.
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Cost of Long-Term Assets Buildings –
•Purchase price, •Sales taxes,
•Title search and transfer document costs,
•Realtor’s and attorney’s fees, and •Remodeling costs.
Equipment –
•Purchase price (less discounts),
•Sales taxes, •Delivery costs, •Installation costs, and
•Costs to adapt to intended
use.
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Cost of Long-Term Assets
Land –
•Purchase price, •Sales taxes,
•Title search and transfer document costs,
•Realtor’s and attorney’s fees,
•Costs of removal of old buildings, and •Grading costs.
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