Chapter 9: Reporting and Analyzing Long-Lived Assets

These flashcards cover key concepts from Chapter 9 on reporting and analyzing long-lived assets, focusing on fixed assets, costs associated with land, disposal of plant assets, and the accounting treatment for gains and losses.

What is the classification of fixed assets in accounting?

Fixed assets are long-term assets acquired to help operate the company and are not intended for resale.

What are some examples of fixed assets?

Delivery trucks, land for factories, and parking lots for factory employees.

What is included in the cost of land?

Cash purchase price, closing costs, real estate broker's commissions, and accrued property taxes.

What is a land improvement?

Enhancements or structural additions to land, such as driveways, fences, and landscaping.

How do you record the cost of installation and training for new machinery?

Record it as a debit to the Machinery account.

What are long-term intangible assets?

Assets used to operate the business that provide rights or privileges, such as patents and trademarks.

How are intangible assets amortized?

Intangible assets are amortized instead of being depreciated.

What is the formula to find book value when disposing of a plant asset?

Book Value = Original Cost - Accumulated Depreciation.

What happens to net income when there is a gain on the sale of an asset?

Gains increase net income.

What is the journal entry when delivery equipment is scrapped with no value?

Loss on sale would equal the book value, and accumulated depreciation and equipment accounts would be debited and credited respectively.

What do you do with cash received when selling an asset?

Increase the cash account by the amount received.

What is the impact on net income when there is a loss on the sale of an asset?

Losses decrease net income.

How to determine gain or loss on the sale of an asset?

Gain or loss = Amount received - Book value.