Principles of Accounting: Chapter Eleven

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Chapter 11 extends the coverage of accounting issues related to property, plant, and equipment. This includes accounting for asset-related costs that are incurred subsequent to acquisition. A distinction is made between costs that are expensed as incurred (i.e., "revenue expenditures") and costs that are capitalized. There are many possible scenarios for asset disposals and asset exchanges, and the accounting framework is described and illustrated through a series of examples. Principles for measuring asset impairments are introduced.

Two additional categories of long-term assets relate to natural resources and intangible assets. Natural resources are reported at the sum of their acquisition and development cost. This cost, less anticipated residual value, is allocated to the units produced through a process known as depletion. Depletion may be assigned to either inventory or cost of goods sold, depending on the circumstances. Intangible assets, like patents and copyrights, are also reported at acquisition cost. The cost of an intangible is allocated over its useful life through a process known as amortization. Some intangibles have an indefinite life (e.g., goodwill) and are not amortized, but are subjected to periodic impairment testing.

Exercises

To aid in your understanding of this chapter, exercises with solutions are available for free download at Bookboon.com. You will find these exercises very helpful in providing models and guidelines for solving all of the problems at principlesofaccounting.com.

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Problems
Goals Achievement
Fill in the Blanks
Multiple Choice
Objectives
Key Terms

Problems: Chapter Eleven

Obtain the entire Long-Term Assets Problem Workbook via the linked image at left. Our high volume production process makes this an economical option as compared to printing these files on your own printer!



Basic		Problem	Worksheet	Combined	Objective

	B-11.01				Classification of costs subsequent to acquisition

	B-11.02				Journal entries for costs subsequent to acquisition

	B-11.03				Disposition of depreciable asset

	B-11.04				Basic asset exchange

	B-11.05				Asset impairment considerations

	B-11.06				Depletion

	B-11.07				Amortization of intangibles



Involved		Problem	Worksheet	Combined	Objective

	I-11.01				Costs subsequent to acquisition and revised depreciation

	I-11.02				Entries and analysis for asset disposals

	I-11.03				Various exchange scenarios

	I-11.04				Natural resource depletion, depreciation, and change in estimate

	I-11.05				Accounting for various intangibles; amortization and impairment

	I-11.06				Team-based evaluation of R&D accounting (global comparison)

The preceding table includes links to "Basic" and "Involved" problems. Each link will download the file containing a spreadsheet for the problem and a template worksheet on which you can prepare the solution electronically. If you see a light bulb icon on a worksheet, just mouse over above the icon and a comment box will appear. The comments include useful suggestions for improving your spreadsheet skills.

Solutions to these problems may be obtained from your instructor, however you may not post or redistribute, electronically or otherwise, any such solution material. Solution material may be provided to you for your sole use only, at the discretion of your individual instructor. Violation of this policy constitutes a copyright violation. Alternative problems, with solutions, may be found under the "Exercises" tab within each chapter. Video solutions to selected problems are available to students enrolling in the online course.