Cost Management
Analysis of Property and Equipment
USD 15.00
Learning Objectives:
- Recognize that tangible operating assets with lives of over one year (such as property and equipment) are initially reported at historical cost.
- Understand the rationale for assigning the cost of these operating assets to expense over time if the item has a finite life.
- Recognize that these assets are reported on the balance sheet at book value, which is cost less accumulated depreciation.
- Explain the reason for not reporting property and equipment at fair value except in specified circumstances.
- Determine the guiding accounting rule that helps ascertain which costs are capitalized in connection with property and equipment and which are expensed.
- List the variables that impact the amount of depreciation to be expensed each period.
- Recognize that the straight-line method predominates in practice but any system that provides a rational approach can be used to create a pattern for depreciation.
- Understand the need to record depreciation for the current period prior to the disposal of property or equipment.
- Construct the journal entry to record the disposal of property or equipment and the recognition of a gain or loss.
- Explain the half-year convention and the reason that it is frequently used by companies for reporting purposes.
- Explain the justification for accelerated methods of depreciation.
- Compute depreciation expense using the double-declining balance method.
- Realize that the overall impact on net income is not affected by a particular cost allocation pattern.
- Describe the units-of-production method, including its advantages and disadvantages.
- Compute depletion expense for a wasting asset such as an oil well or a forest of trees.
- Explain the reason that depletion amounts are not directly recorded as an expense.
- Record the exchange of one asset for another based on fair value and explain the rationale for this method of recording.
- Determine when the fair value of an asset received is used for recording an exchange rather than the fair value of the property surrendered.
- Compute the allocation of cost between assets when more than one is required in a single transaction.
- Know when expenditures must be capitalized for an asset that has been in use for some time and the impact on future depreciation expense calculations.
- Recognize the type of assets that are often labeled as land improvements and understand that the distinction between land and land improvements is not always clear.
- Perform the two tests utilized to identify the need to recognize a loss because of impairment in the value of property or equipment.
- Explain the justification for capitalizing interest incurred during the construction of property and equipment.
Course Features
Credits:
3 PDU
Skill section:
Technical
Access:
Lifetime
Test questions:
15