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Capital Assets

Capital Assets. Capital Assets are…. Assets used in the operations of a company and have a useful life of more than one accounting period. Also called fixed assets, include plant and equipment; property, plant and equipment; natural resources and intangible assets. Exercise.

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Capital Assets

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  1. Capital Assets

  2. Capital Assets are… • Assets used in the operations of a company and have a useful life of more than one accounting period. • Also called fixed assets, include plant and equipment; property, plant and equipment; natural resources and intangible assets.

  3. Exercise • Identify all of the capital assets you own personally… • What could you classify as a capital asset? • What do you own that will be useful/entertaining to you for an extended period of time? • If you don’t own any, list some that your family owns…

  4. Exhibit 12.1 Decline in Book Value Over Service Life Issues in Accounting for Capital Assets 2. Account for subsequent costs. 3. Allocate cost to periods benefited. 2. Account for subsequent costs. 3. Allocate cost to periods benefited. 2. Account for subsequent costs. 3. Allocate cost to periods benefited. 2. Account for subsequent costs. 3. Allocate cost to periods benefited. 2. Account for subsequent costs. 3. Allocate cost to periods benefited. 2. Account for subsequent costs. 3. Allocate cost to periods benefited. 1. Compute initial acquisition cost. 1. Compute initial acquisition cost. 4. Record disposal 4.Record disposal 4.Record disposal 1. Compute initial acquisition cost. 1. Compute initial acquisition cost. 4. Record disposal 4. Record disposal

  5. Cost of Capital Assets  General Rule • Capital Expenditures  Costs related to the capital asset that will extend its life span. The necessary costs (i.e. installation costs, assembly, testing). Purchase Price. • Revenue Expenditures  Costs that maintain an asset but do not materially increase the asset’s life or productive capabilities (Eg. Buying a car battery).

  6. Cost of Capital Assets  Land Title insurance premiums Purchaseprice Delinquent taxes Real estate commissions Surveyingfees Title search and transfer fees Land is not subject to amortization.

  7. Cost of Capital Assets  Building Purchaseprice Installationcosts Architecturalfees Transportation costs Cost ofpermits Excavation andconstruction costs

  8. Is it a Capital or Revenue Expenditure??

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