TAILIEUCHUNG - Lecture Intermediate accounting (4/e): Chapter 11 - Spiceland, Sepe, Tomassini

Chapter 11 - Operational assets: Utilization and impairment. This chapter completes our discussion of accounting for operational assets. We address the allocation of the cost of these assets to the periods benefited by their use. | Operational Assets: Utilization and Impairment 11 Insert Book Cover Picture Chapter 11: Operational Assets: Utilization and Impairment. Learning Objectives Explain the concept of cost allocation as it pertains to operational assets. LO1 Our first learning objective in Chapter 11 is to explain the concept of cost allocation as it pertains to operational assets. Some of the cost is expensed each period. Cost Allocation – An Overview Expense Acquisition Cost (Balance Sheet) (Income Statement) The matching principle requires that part of the acquisition cost of operational assets be expensed in periods when the future revenues are earned. The matching principle requires that part of the acquisition cost of an operational asset be expensed in periods when the future revenues are earned. A portion of an asset’s cost is moved from the balance sheet to the income statement each period. Cost Allocation – An Overview Some of the cost is expensed each period. Expense Acquisition Cost (Balance Sheet) (Income Statement) Depreciation, depletion, and amortization are cost allocation processes used to help meet the matching principle requirements. Depreciation, depletion, and amortization are cost allocation processes. We allocate the cost of the asset to expense over its useful life in some rational and systematic manner. The unused portion of the asset’s cost appears on the balance sheet. We allocate a portion of the cost to expense on the income statement each accounting period. Accumulated depreciation represents the depreciation taken on the asset since its purchase, and is deducted from the asset’s cost on the balance sheet. Caution! Depreciation, depletion, and amortization are processes of cost allocation, not valuation! Cost Allocation – An Overview Depreciation is term used for the the cost allocation process for operational assets in the property plant and equipment category. Land is not depreciated Depletion is the cost allocation process for natural resource .

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• Intermediate accounting
• Lecture Intermediate accounting
• Financial Accounting
• Operational assets
• Double declining balance
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• Accounting process
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• Stock issuance
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• Liquidating dividends
• Accounting changes
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