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PRDV201: Accounting Principles I

Unit 6: Long-Term Tangible Asset Reporting   In this unit, you will learn about “tangible assets,” or items that have a “physical” presence and are either owned or leased by the company.  Examples of tangible assets include warehouse space, retail stores, and machinery.  Depending on the type of company, tangible assets are extremely important to the value of the company and essential to operations.  Tangible assets are reflected on a company’s financial statements and must be recorded in a company’s accounting books.

Although assets generally add value to a company, they have the potential to lose value and are sometimes sold to generate cash.  For example, when a company sells its machinery and other operational equipment, the transactions must be properly recorded, because the sales affect the company’s tangible asset totals.  In this unit, you will learn the appropriate actions when a loss in value occurs, as well as the correct way to record the sale of tangible assets in accordance with the “fundamental accounting equation.”

By the end of this unit, you will be able to identify different types of long-term tangible assets and how they are recorded on a company’s financial statements.  As you work through this unit, be sure to pay close attention to the calculation and recording of depreciation and tangible asset losses.

Unit 6 Time Advisory
This unit should take approximately 3 hours to complete.

☐    Subunit 6.1: 0.5 hours

☐    Subunit 6.2: 2.5 hours

Unit6 Learning Outcomes
Upon successful completion of this unit, the student will be able to: - Explain the difference between cost capitalization and expenses. - Define and contrast depreciation and amortization. - Explain how to use common methods to calculate depreciation and impairment loss of long-term assets, and make these calculations. - Explain how to prepare journal entries for depreciation, impairment loss entries, PP&E acquisition, and PP&E disposal.

6.1 Investments   - Reading: Dr. Larry Walther’s Principles of Accounting: “Chapter 9: Long-Term Investments” Link: Dr. Larry Walther’s Principles of Accounting: “Chapter 9: Long-Term Investments” (HTML)

 Instructions: Please click on the link above and read all the
sections included in this chapter.  As you read, take notes on the
different long-term investment instruments that businesses can and
often invest in.  Also, pay attention to how these investments are
recorded on financial statements and how their changes in valuation
may affect a company’s accounting statements.  

 Reading this chapter and taking notes should take approximately 30
minutes.  

 Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.

6.2 What Are Tangible Assets?   - Reading: Global Text Project: James Don Edwards and Roger H. Hermanson’s Accounting Principles: A Business Perspective, First Global Text Edition, Volume 1: Financial Accounting: “Chapter 10: Property, Plant, and Equipment” Link: Global Text Project: James Don Edwards and Roger H. Hermanson’s Accounting Principles: A Business Perspective, First Global Text Edition, Volume 1: Financial Accounting: “Chapter 10: Property, Plant, and Equipment” (PDF)

 Instructions: If you have not already saved this document to your
desktop, please click on the link above to download the PDF.  Read
the section titled “Property, Plant, and Equipment” on pages 438 and
439.  As you read, pay close attention to how tangible assets are
defined and what examples could be used to define them.  By the end
of this reading, you should be able to provide examples and
definitions related to tangible assets.  

 Reading this chapter and taking notes should take approximately 10
minutes.  

 Terms of Use: The book above is released under a [Creative Commons
Attribution-Non-Commercial-Share-Alike License
3.0](http://creativecommons.org/licenses/by-nc-sa/3.0/).  It is
attributed to James Don Edwards and Roger H. Hermanson, and the
original version can be found
[here](http://dl.dropbox.com/u/31779972/Accounting%20Principles%20Vol.%201.pdf).

6.2.1 Property, Plant, & Equipment (PP&E;)   - Reading: Dr. Larry Walther’s Principles of Accounting: “Chapter 10: Property, Plant, and Equipment” Link: Dr. Larry Walther’s Principles of Accounting: “Chapter 10: Property, Plant, and Equipment” (HTML)

 Instructions: Please click on the link above and read the “What
Costs Are Included in Property, Plant, and Equipment?” section in
this chapter.  As you read, take notes on the various costs that are
associated with buying and maintaining property, plant, and
equipment.  By the end of this reading, you should be able to easily
identify components that are included in the property, plant, and
equipment category.  

 Reading this chapter and taking notes should take approximately 15
minutes.  

 Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.

6.2.2 Acquisition of PP&E;   - Reading: Global Text Project: James Don Edwards and Roger H. Hermanson’s Accounting Principles: A Business Perspective, First Global Text Edition, Volume 1: Financial Accounting: “Chapter 10: Property, Plant, and Equipment” Link: Global Text Project: James Don Edwards and Roger H. Hermanson’s Accounting Principles: A Business Perspective, First Global Text Edition, Volume 1: Financial Accounting: “Chapter 10: Property, Plant, and Equipment” (PDF)

 Instructions: If you have not already saved this document to your
desktop, please click on the link above to download the PDF.  Read
the section titled “Initial Recording of Plant Assets” on pages
440–444.  As you read, pay close attention to the costs associated
with land improvements and how this may affect the book and market
value of property, plant, and equipment.  By the end of this
reading, you should be able to define acquisition cost, land
improvement, book value, and market value.  

 Reading this chapter and taking notes should take approximately 20
minutes.  

 Terms of Use: The book above is released under a [Creative Commons
Attribution-Non-Commercial-Share-Alike License
3.0](http://creativecommons.org/licenses/by-nc-sa/3.0/).  It is
attributed to James Don Edwards and Roger H. Hermanson, and the
original version can be found
[here](http://dl.dropbox.com/u/31779972/Accounting%20Principles%20Vol.%201.pdf).

6.2.3 Depreciation   - Lecture: Dr. Larry Walther’s Principles of Accounting: “Depreciation Concepts” Link: Dr. Larry Walther’s Principles of Accounting: “Depreciation Concepts” (YouTube)

 Instructions: Please click on the link above and watch the entire
lecture.  As you watch the lecture, take notes on depreciation and
the importance of considering depreciation when evaluating the value
of tangible assets.  

 Watching this lecture and taking notes should take approximately 10
minutes.  

 Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.

6.2.3.1 Straight-Line Depreciation   - Lecture: Dr. Larry Walther’s Principles of Accounting: “Straight-Line Depreciation” Link: Dr. Larry Walther’s Principles of Accounting: “Straight-Line Depreciation” (YouTube)

 Instructions: Please click on the link above, and watch the entire
lecture.  As you watch the lecture, take notes on how to calculate
straight-line depreciation and how this is then recorded on the
financial statements of a company.  

 Watching this lecture and taking notes should take approximately 10
minutes.  

 Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.
  • Activity: Dr. Larry Walther’s Principles of Accounting: “Chapter 10: Property, Plant, and Equipment: Straight-Line Depreciation Worksheet” Link: Dr. Larry Walther’s Principles of Accounting: “Chapter 10: Property, Plant, and Equipment: Straight-Line Depreciation Worksheet” (PDF)

    Instructions: Please click on the link above and carefully read the directions before completing the worksheet.  Calculate the straight-line depreciation for the given scenarios.  If you have difficulty completing the worksheet, refer back to the lectures assigned in this sub-subunit.

    Reviewing your previous readings and lectures and completing this worksheet should take approximately 15 minutes.

    Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

6.2.3.2 Double Declining Balance Depreciation   - Lecture: Dr. Larry Walther’s Principles of Accounting: “Double-Declining Depreciation” Link: Dr. Larry Walther’s Principles of Accounting: “Double-Declining Depreciation” (YouTube)

 Instructions: Please click on the link above and watch the lecture.
 As you watch the lecture, take notes on how to calculate double
declining depreciation and how this is then recorded on the
financial statements of a company.  

 Watching this lecture and taking notes should take approximately 10
minutes.  

 Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.
  • Activity: Dr. Larry Walther’s Principles of Accounting: “Chapter 10: Property, Plant, and Equipment: Double Declining Balance Worksheet” Link: Dr. Larry Walther’s Principles of Accounting: “Chapter 10: Property, Plant, and Equipment: Double Declining Balance Worksheet” (PDF)

    Instructions: Please click on the link above, and carefully read the directions before completing the worksheet.  Calculate the double declining balance depreciation for the given scenarios.  If you have difficulty completing the worksheet, refer back to the lectures assigned in this sub-subunit.

    Reviewing your previous readings and lectures and completing this worksheet should take approximately 15 minutes.

    Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

6.2.4 Disposal of PP&E;   - Reading: Dr. Larry Walther’s Principles of Accounting: “Chapter 11: Advanced PP&E; Issues/Natural Resources/Intangibles” Link: Dr. Larry Walther’s Principles of Accounting: “Chapter 11: Advanced PP&E Issues/Natural Resources/Intangibles” (HTML)

 Instructions: Please click on the link above and read the “Disposal
of PP&E” section of this chapter.  As you read, take notes on how
the disposal of property, plant, and equipment is handled and how
the disposal value is calculated and recorded on the business’s
financial statements.  By the end of this reading, you should feel
comfortable with calculating disposal values and doing journal
entries related to the values you calculate.  

 Reading this chapter and taking notes should take approximately 10
minutes.  

 Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.
  • Activity: Dr. Larry Walther’s Principles of Accounting: “Chapter 11: Advanced PP&E; Issues/Natural Resources/Intangibles: PP&E; Disposal Worksheet” Link: Dr. Larry Walther’s Principles of Accounting: “Chapter 11: Advanced PP&E Issues/Natural Resources/Intangibles: PP&E Disposal Worksheet” (PDF)

    Instructions: Please click on the link above, and carefully read the directions before completing the worksheet.  Calculate the PP&E disposal for the given scenarios.  If you have difficulty completing the worksheet, refer back to the lectures assigned in this sub-subunit.

    Reviewing your previous readings and completing this worksheet should take approximately 15 minutes.

    Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.

6.2.5 Asset Impairment of PP&E;   - Reading: Dr. Larry Walther’s Principles of Accounting: “Chapter 11: Advanced PP&E; Issues/Natural Resources/Intangibles” Link: Dr. Larry Walther’s Principles of Accounting: “Chapter 11: Advanced PP&E Issues/Natural Resources/Intangibles” (HTML)

 Instructions: Please click on the link above and read the
“Accounting for Asset Exchange” and “Asset Impairment” sections of
this chapter.  As you read, take notes on how the value of assets is
determined throughout the usable life of the asset.  By the end of
this reading, you should be able to outline how increase in asset
value and how decreases in asset values are calculated and recorded
in journal entries.  

 Reading this chapter and taking notes should take approximately 15
minutes.  

 Terms of Use: Please respect the copyright and terms of use
displayed on the webpage above.
  • Activity: Dr. Larry Walther’s Principles of Accounting: “Chapter 11: Advanced PP&E; Issues/Natural Resources/Intangibles: Asset Impairment Worksheet” Link: Dr. Larry Walther’s Principles of Accounting: “Chapter 11: Advanced PP&E Issues/Natural Resources/Intangibles: Asset Impairment Worksheet” (PDF)

    Instructions: Please click on the link above and carefully read the directions before completing the worksheet.  Calculate the asset impairment for the given scenarios.  If you have difficulty completing the worksheet, refer back to the lectures assigned in this sub-subunit.

    Reviewing your previous readings and completing this worksheet should take approximately 15 minutes.

    Terms of Use: Please respect the copyright and terms of use displayed on the webpage above.