- Accounts receivable: costs capitalized and the buyer has gain or loss if the amount collected varies from the amount capitalized.
- Inventory: costs capitalized and deducted against sales as cost of goods sold.
- Equipment: costs capitalized and depreciated. Sales tax may apply to the amount allocated to the equipment.
- Franchises and the right to use trade names and trademarks: generally, payments are currently deductible if the amount of the payments is contingent on the use, productivity or disposition of the franchise, trademark or trade name. If the amount of the payments is not contingent, the deductions are spread over 15 years. If the buyer acquires all of the seller’s significant rights in the franchise, trademark or trade name, the buyer cannot deduct the amount paid for these items unless the buyer can show that they have a limited useful life.
- Land: costs capitalized and not deducted or depreciated.
¬- Real estate improvements: costs capitalized and depreciated.
- Favorable lease: costs allocated to the lease are amortized over the remaining lease term. (not subject to the 15-year amortization rule for other intangibles)
- Consulting agreements, employment agreements: payments generally deductible over the term of the agreement.
- Covenants not to compete: capitalize and deduct over 15 years (capitalize each payment and amortize it over the balance of the 15-year period, as opposed to taking 1/15th of the aggregate covenant payments in the first
A franchise is a legal agreement between franchisers and franchisees that consents use of the franchise’s trademark and trade name or marketing plan
1. The inventory at your company consists of computer software that the company has developed and is selling. You capitalized (rather than expensed) the cost of duplicating the software, the instruction manuals, and training material that are sold with the software.
According to IAS 16, The cost of an item of property, plant and equipment comprises, its purchase price, including
835-20-15-8 Land that is not undergoing activities necessary to get it ready for its intended use is not a qualifying asset. If activities are undertaken for the purpose of developing land for a particular use, the expenditures to acquire the land qualify for interest capitalization while those activities are in progress. The interest cost capitalized on those expenditures is a cost of acquiring the asset that results from those activities. If the resulting asset is a structure, such as a plant or a shopping center, interest capitalized on the land expenditures is part of the acquisition cost of the structure. If the resulting asset is developed land, such as land that is to be sold as developed lots, interest capitalized on the land expenditures is part of the acquisition cost of the developed land.
The equipment can be depreciated by one of two methods: Section 179 allows for a full write off in the year of acquisition (subject to certain limits). MACRS depreciation allows a systematic write off of equipment based on the type of asset. More business assets are either 5 year or 7 year property (CompleteTax, 2012).
f. The midpoint range for straight-line depreciation of transmission equipment is 22 years. The $771 million capitalized in the first quarter would be depreciated for a full year ($35,045,455). The $610 million in the second quarter would be depreciated for 9/12 of the year ($20,795,455). The $743 million
Bug-Off Exterminators provides pest control services and sells extermination products manufactured by other companies. The following six-column table contains the company's unadjusted trial balance as of December 31, 2011.
The type of depreciation method the Target Corporation uses is a straight-line method. Property and equipment is depreciated using the straight-line method over estimated useful lives or lease terms if shorter. “Target amortizes leasehold improvements purchased after the beginning of the initial lease term over the shorter of the assets' useful lives or a term that includes the original lease term, plus any renewals that are reasonably assured at the date the leasehold improvements are acquired” (Stock Analysis, n.d.).
C. In a sales-type lease the carrying value of the asset is charged to cost of the asset leased (expense), and the present value of the minimum lease payment as the amount of the sale. For direct financing leases no sales or expense is recognized because the asset is removed from the books. The difference between its carrying value and the undiscounted minimum lease payments is recorded as unearned interest revenue. The net investment in a sales type lease ia accounted for in a similar manner as a direct financing
Equipment costs should be on a per kit basis as it depends on the number of kits sold.
A restructuring of debt constitutes a troubled debt restructuring… if the creditor for economic or legal
Account receivables accounts for purchases which consumers have not yet aid for. This takes cares of any losses that the firm might incur due to allowing credit to certain clients. Bad debts are recorded in the income statement and they represent the des which the company doesn’t expect to be paid back. The account
Property, Plant & Equipment (PPE) (AASB 116): “Property, plant and equipment are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the item including borrowing costs that are related to the
Please note you have three assignments for this week. The case study, the weekly assignment and continue working on the final draft for the individual research project.
iii. “Equipment and Property Under Capital Lease: Flight Equipment” will be reported as $8,869 which is equal to the original present value of the lease ($323) plus the converted amount ($8,546).