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Acquisition and Disposition of Property, Plant, and Equipment

Describe property, plant, and equipment.Identify the costs to include in initial valuation of property, plant, and equipment.Describe the accounting problems associated with self-constructed assets.Describe the accounting problems associated with interest capitalization.Understand accounting issues related to acquiring and valuing plant assets.Describe the accounting treatment for costs subsequent to acquisition.Describe the accounting treatment for the disposal of property, plant, and equ30136

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Acquisition and Disposition of Property, Plant, and Equipment

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    1. Acquisition and Disposition of Property, Plant, and Equipment Chapter 10

    2. Describe property, plant, and equipment. Identify the costs to include in initial valuation of property, plant, and equipment. Describe the accounting problems associated with self-constructed assets. Describe the accounting problems associated with interest capitalization. Understand accounting issues related to acquiring and valuing plant assets. Describe the accounting treatment for costs subsequent to acquisition. Describe the accounting treatment for the disposal of property, plant, and equipment. Learning Objectives 1. On the topic, “Challenges Facing Financial Accounting,” what did the AICPA Special Committee on Financial Reporting suggest should be included in future financial statements? Non-financial Measurements (customer satisfaction indexes, backlog information, and reject rates on goods purchases). Forward-looking Information Soft Assets (a company’s know-how, market dominance, marketing setup, well-trained employees, and brand image). Timeliness (no real time financial information) 1. On the topic, “Challenges Facing Financial Accounting,” what did the AICPA Special Committee on Financial Reporting suggest should be included in future financial statements? Non-financial Measurements (customer satisfaction indexes, backlog information, and reject rates on goods purchases). Forward-looking Information Soft Assets (a company’s know-how, market dominance, marketing setup, well-trained employees, and brand image). Timeliness (no real time financial information)

    3. Property, Plant, and Equipment

    4. Acquisition and Valuation of PP&E

    5. Acquisition and Valuation of PP&E

    6. Acquisition and Valuation of PP&E

    7. Acquisition and Valuation of PP&E

    8. Acquisition and Valuation of PP&E

    9. Acquisition and Valuation of PP&E

    10. Acquisition and Valuation of PP&E

    11. Acquisition and Valuation of PP&E

    12. Acquisition and Valuation of PP&E

    13. Acquisition and Valuation of PP&E

    14. Acquisition and Valuation of PP&E Begins when: Expenditures for the asset have been made. Activities for readying the asset are in progress . Interest costs are being incurred. Ends when: The asset is substantially complete and ready for use.

    15. Acquisition and Valuation of PP&E Capitalize the lesser of: Actual interest costs Avoidable interest - the amount of interest that could have been avoided if expenditures for the asset had not been made.

    16. Acquisition and Valuation of PP&E

    17. Acquisition and Valuation of PP&E

    18. Acquisition and Valuation of PP&E

    19. Acquisition and Valuation of PP&E Selecting Appropriate Interest Rate: For the portion of weighted-average accumulated expenditures that is less than or equal to any amounts borrowed specifically to finance construction of the assets, use the interest rate incurred on the specific borrowings. For the portion of weighted-average accumulated expenditures that is greater than any debt incurred specifically to finance construction of the assets, use a weighted average of interest rates incurred on all other outstanding debt during the period.

    20. Acquisition and Valuation of PP&E

    21. Acquisition and Valuation of PP&E

    24. Valuation

    25. Valuation

    26. Valuation

    27. Valuation

    28. Valuation

    29. Valuation

    32. Valuation

    35. Valuation

    36. Valuation

    38. Valuation

    39. Valuation

    40. Valuation

    41. Valuation

    43. Valuation

    44. Valuation

    45. Lacks Commercial Substance (Cash Paid) If a company receives no cash (boot) or pays cash (boot) in such an exchange, it defers recognition of a gain*. See Exercise 20(b) –Solution and review how New Equipment Cost is calculated. * BUT, if cash is 25% or more of the fair value of the exchange, recognize entire gain because earnings process is complete. See Exercise 18(b) –Solution and review how New Equipment Cost is was calculated. **Solutions are in a separate WORD File

    46. Valuation

    47. Valuation

    48. Costs Subsequent to Acquisition

    49. Costs Subsequent to Acquisition

    50. Disposition of Plant Assets

    51. Disposition of Plant Assets

    52. Disposition of Plant Assets

    53. Disposition of Plant Assets

    54. Disposition of Plant Assets

    55. Disposition of Plant Assets

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