10: In a Set of Financial Statements, What Information Is Conveyed about Property and Equipment?
- Page ID
- 24742
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\(\newcommand{\avec}{\mathbf a}\) \(\newcommand{\bvec}{\mathbf b}\) \(\newcommand{\cvec}{\mathbf c}\) \(\newcommand{\dvec}{\mathbf d}\) \(\newcommand{\dtil}{\widetilde{\mathbf d}}\) \(\newcommand{\evec}{\mathbf e}\) \(\newcommand{\fvec}{\mathbf f}\) \(\newcommand{\nvec}{\mathbf n}\) \(\newcommand{\pvec}{\mathbf p}\) \(\newcommand{\qvec}{\mathbf q}\) \(\newcommand{\svec}{\mathbf s}\) \(\newcommand{\tvec}{\mathbf t}\) \(\newcommand{\uvec}{\mathbf u}\) \(\newcommand{\vvec}{\mathbf v}\) \(\newcommand{\wvec}{\mathbf w}\) \(\newcommand{\xvec}{\mathbf x}\) \(\newcommand{\yvec}{\mathbf y}\) \(\newcommand{\zvec}{\mathbf z}\) \(\newcommand{\rvec}{\mathbf r}\) \(\newcommand{\mvec}{\mathbf m}\) \(\newcommand{\zerovec}{\mathbf 0}\) \(\newcommand{\onevec}{\mathbf 1}\) \(\newcommand{\real}{\mathbb R}\) \(\newcommand{\twovec}[2]{\left[\begin{array}{r}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\ctwovec}[2]{\left[\begin{array}{c}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\threevec}[3]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\cthreevec}[3]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\fourvec}[4]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\cfourvec}[4]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\fivevec}[5]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\cfivevec}[5]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\mattwo}[4]{\left[\begin{array}{rr}#1 \amp #2 \\ #3 \amp #4 \\ \end{array}\right]}\) \(\newcommand{\laspan}[1]{\text{Span}\{#1\}}\) \(\newcommand{\bcal}{\cal B}\) \(\newcommand{\ccal}{\cal C}\) \(\newcommand{\scal}{\cal S}\) \(\newcommand{\wcal}{\cal W}\) \(\newcommand{\ecal}{\cal E}\) \(\newcommand{\coords}[2]{\left\{#1\right\}_{#2}}\) \(\newcommand{\gray}[1]{\color{gray}{#1}}\) \(\newcommand{\lgray}[1]{\color{lightgray}{#1}}\) \(\newcommand{\rank}{\operatorname{rank}}\) \(\newcommand{\row}{\text{Row}}\) \(\newcommand{\col}{\text{Col}}\) \(\renewcommand{\row}{\text{Row}}\) \(\newcommand{\nul}{\text{Nul}}\) \(\newcommand{\var}{\text{Var}}\) \(\newcommand{\corr}{\text{corr}}\) \(\newcommand{\len}[1]{\left|#1\right|}\) \(\newcommand{\bbar}{\overline{\bvec}}\) \(\newcommand{\bhat}{\widehat{\bvec}}\) \(\newcommand{\bperp}{\bvec^\perp}\) \(\newcommand{\xhat}{\widehat{\xvec}}\) \(\newcommand{\vhat}{\widehat{\vvec}}\) \(\newcommand{\uhat}{\widehat{\uvec}}\) \(\newcommand{\what}{\widehat{\wvec}}\) \(\newcommand{\Sighat}{\widehat{\Sigma}}\) \(\newcommand{\lt}{<}\) \(\newcommand{\gt}{>}\) \(\newcommand{\amp}{&}\) \(\definecolor{fillinmathshade}{gray}{0.9}\)- 10.1: The Reporting of Property and Equipment
- This page discusses the accounting treatment of tangible assets, emphasizing that they are recorded at historical cost and depreciated over time. Wal-Mart's $93 billion in property and equipment exemplifies significant financial investment. Fair value reporting remains contentious due to concerns over subjectivity and reliability, with historical cost favored for objectivity.
- 10.2: Determining Historical Cost and Depreciation Expense
- This page explains how the historical cost determines the depreciable base of an asset, which is expensed evenly over its useful life. An adjusting entry transfers depreciation expense to the income statement, recorded through accumulated depreciation, aligning with the matching principle for accurate financial reporting. The lifespan of assets varies; for example, Wal-Mart's buildings can last five to fifty years, while land remains non-depreciable due to its indefinite lifespan.
- 10.3: Recording Depreciation Expense for a Partial Year
- This page teaches students to record depreciation prior to asset disposal, create journal entries for these disposals, and apply the half-year convention. It emphasizes the need for companies to account for depreciation and recognize gains or losses from asset sales, often calculated to the nearest month for assets held under a year. The half-year convention aids in accurate financial reporting while simplifying record-keeping tasks.
- 10.4: Alternative Depreciation Patterns and the Recording of a Wasting Asset
- This page explains the concepts of depletion and depreciation in relation to natural resources. It details that $570,000 in depletion expense is recorded for Year One from mined land, based on 3,000 tons extracted. In Year Two, an additional 3,600 tons are extracted, with a depletion expense of $684,000. After extraction, the land's net book value is $746,000 against a $2 million historical cost.
- 10.5: Recording Asset Exchanges and Expenditures That Affect Older Assets
- This page outlines key accounting practices regarding asset exchanges, emphasizing recording at fair value and proper cost allocation. It details that improvements to assets that enhance capacity or efficiency lead to capitalization, affecting depreciation. Conversely, costs that do not physically improve an asset but extend its life adjust accumulated depreciation.
- 10.6: Reporting Land Improvements and Impairments in the Value of Property and Equipment
- This page covers key concepts in accounting related to land and property, including the difference between land and land improvements, impairment recognition tests, and interest capitalization in building construction versus purchase. It emphasizes that land is not depreciated, while improvements are, and outlines the methods of assessing property value decline under U.S. GAAP and IFRS.
- 10.7: End-of-Chapter Exercises
- This page discusses property, plant, and equipment (PP&E) in accounting, covering definitions, depreciation methods, and related transactions. It includes true/false questions and multiple-choice assessments on accumulated depreciation, book value, and impairment losses. Key scenarios involve Janus's building recording, Markov Corporation's land transactions, Chang and Chang Inc.'s machine depreciation, Partyplace's vehicle purchases, and Webworks's comprehensive financial tasks.