The following learning objectives for this chapter map to the curriculum design for our online university-level courses. These courses are offered through Utah State University, and result in the awarding of up to 6 hours of highly transferrable college credit. To learn more, check out the classroom link.

 

Measurement of costs assigned to property, plant, and equipment.

Be able to prepare the property, plant, and equipment section on a balance sheet.

Know those costs that are properly included in an asset's cost, and those that should be expensed as incurred.

Understand the meaning of the term "capital expenditure."

Identify the appropriate treatment of interest and training costs on purchased and constructed assets.

Distinguish between land and land improvement costs.

Know how to apportion the cost of a lump-sum purchase to the specific assets acquired.

State why some long-lived assets may be expensed in the period acquired.

Explain the significance of judgment and materiality in accounting for property, plant, and equipment.

 

Principles relating to service life and depreciation.

Carefully define depreciation.

Distinguish between service life and physical life.

What key factors affect the determination of service life?

 

Depreciation concepts and terminology.

Be able to explain why multiple depreciation methods exist.

Define cost, service life, salvage value, depreciable base, and book value.

 

The straight-line, units-of-output, and double-declining balance depreciation methods.

Apply the straight-line method of depreciation, including situations involving partial periods.

Apply the units-of-output method of depreciation.

Apply the declining-balance method of depreciation, including situations involving partial periods.

Be aware of declining-balance alternatives, such as 200%, 150%, and 125% rates.

Know that electronic spreadsheets usually have built-in functions supporting depreciation calculations.

How are changes in estimates (e.g., useful life) dealt with in the basic depreciation computations?

Recognize that global approaches vary, and assets are sometimes revalued in global reporting.

 

Unique features of depreciation under tax codes.

Must you use the same depreciation method for tax and financial reporting purposes?

What is the modified accelerated cost recovery system?

What are key differences, generally, between tax and financial reporting of depreciation-related amounts?

 

Equipment leases and the accounting implications.

Who is a lessee, and who is a lessor?

Cite some possible advantages of a lease.

Distinguish between an operating lease and a capital lease.

Describe general principles of accounting for an operating lease?

Describe general principles of accounting for a capital lease?