Chapter 7 - Long-term assets. After reading the material in this chapter, you should be able to: Identify the major types of property, plant, and equipment; identify the major types of intangible assets; describe the accounting treatment of expenditures after acquisition; calculate depreciation of property, plant, and equipment; calculate amortization of intangible assets; account for the disposal of long-term assets. | Long-Term Assets Chapter 7 1 Learning Objectives Identify the major types of property, plant, and equipment Identify the major types of intangible assets Describe the accounting treatment of expenditures after acquisition Calculate depreciation of property, plant, and equipment Calculate amortization of intangible assets Account for the disposal of long-term assets Learning Objectives Describe the links among return on assets, profit margin, and asset turnover Identify impairment situations and describe the two-step impairment process Long-Term Assets Long-term assets are assets that help generate revenue. Long-term assets are classified into two major categories: Tangible assets: Assets in this category include land, land improvements, buildings, equipment, and natural resources. Intangible assets: Assets in this category include patents, trademarks, copyrights, franchises, and goodwill. We distinguish these assets from property, plant, and equipment by their lack of physical substance. The evidence of their existence often is based on a legal contract. 4 Part A Acquisitions 7-5 In this section, we will consider the first issue in accounting for long-term assets which is to identify them and measure their costs. 5 Learning Objective 1 Identify the Major Types of Property, Plant, and Equipment 7-6 Property, Plant, and Equipment Capitalize: recording an expenditure as an asset Recorded at: Cost of asset All expenditures necessary to get it ready for use + The property, plant, and equipment category consists of land, land improvements, buildings, equipment, and natural resources. We record a long-term asset at its cost plus all expenditures necessary to get the asset ready for use. Thus, the initial cost of a long-term asset might be more than just its purchase price; it also will include any additional amounts the firm paid to bring the asset to its desired condition and location for use. We use the term capitalize to describe recording an expenditure as an asset. 7 | Long-Term Assets Chapter 7 1 Learning Objectives Identify the major types of property, plant, and equipment Identify the major types of intangible assets Describe the accounting treatment of expenditures after acquisition Calculate depreciation of property, plant, and equipment Calculate amortization of intangible assets Account for the disposal of long-term assets Learning Objectives Describe the links among return on assets, profit margin, and asset turnover Identify impairment situations and describe the two-step impairment process Long-Term Assets Long-term assets are assets that help generate revenue. Long-term assets are classified into two major categories: Tangible assets: Assets in this category include land, land improvements, buildings, equipment, and natural resources. Intangible assets: Assets in this category include patents, trademarks, copyrights, franchises, and goodwill. We distinguish these assets from property, plant, and equipment by their lack of physical .
