DOC PREVIEW
SMU ACCT 3311 - Lecture Notes

This preview shows page 1-2-17-18-19-35-36 out of 36 pages.

Save
View full document
View full document
Premium Document
Do you want full access? Go Premium and unlock all 36 pages.
Access to all documents
Download any document
Ad free experience
View full document
Premium Document
Do you want full access? Go Premium and unlock all 36 pages.
Access to all documents
Download any document
Ad free experience
View full document
Premium Document
Do you want full access? Go Premium and unlock all 36 pages.
Access to all documents
Download any document
Ad free experience
View full document
Premium Document
Do you want full access? Go Premium and unlock all 36 pages.
Access to all documents
Download any document
Ad free experience
View full document
Premium Document
Do you want full access? Go Premium and unlock all 36 pages.
Access to all documents
Download any document
Ad free experience
View full document
Premium Document
Do you want full access? Go Premium and unlock all 36 pages.
Access to all documents
Download any document
Ad free experience
View full document
Premium Document
Do you want full access? Go Premium and unlock all 36 pages.
Access to all documents
Download any document
Ad free experience
Premium Document
Do you want full access? Go Premium and unlock all 36 pages.
Access to all documents
Download any document
Ad free experience

Unformatted text preview:

From Reader’s DigestOffice Hours TomorrowSlide 3Noncash AcquisitionsNoncash AcquisitionsExample 5Example 5: ContinuedDispositionsExchangesExample 6Example 6: ContinuedDiscussion QuestionsDiscussion QuestionsExchange Lacks Commercial SubstanceExample 7Example 7: ContinuedExample 7: ContinuedAccounting for ContributionsDiscussion QuestionsDiscussion QuestionsDisposition of PP&EExample 8Example 8: ContinuedDisposition of PP&EE10-25E10-25: ContinuedExample 9Example 9: ContinuedExample 9Example 9: ContinuedExample 10Example 10: ContinuedExample 10Example 10: ContinuedExample 10Example 10: ContinuedFrom Reader’s Digest•My 50-something friend Nancy and I decided to introduce her mother to the magic of the Internet. Our first move was to access the popular Ask Jeeves site, and we told her it could answer any question she had. Nancy's mother was very skeptical until Nancy said, "It's true, Mom. Think of something to ask it." As I sat with my fingers poised over the keyboard, Nancy's mother thought for a minute, then responded, "How is Aunt Helen feeling?" --Catherine Burns•I am five feet three inches tall and pleasingly plump. After I had a minor accident, my mother accompanied me to the emergency room. The triage nurse asked for my height and weight, and I blurted out, "Five-foot-eight and 125 pounds.“"Sweetheart," my mother gently chided, "this is not the Internet." --M.M. •Anytime companies merge, employees worry about layoffs. When the company I work for was bought, I was no exception. My fears seemed justified when a photo of the newly merged staff appeared on the company's website with the following words underneath: "Updated daily." --Dianne StevensOffice Hours TomorrowInstead of 9:00am to 10:30am,•8:30am to 9:30am and Noon to 1:00pm•And one more item:Correction to Cumulative Final offering timesTuesday December 16th at 3:00pm – 4:30pm, Wednesday December 17th at 11:30am – 1:00pmCHAPTER 10ACQUISITION AND DISPOSITION OF PROPERTY, PLANT, AND EQUIPMENTSommers – ACCT 3311Noncash AcquisitionsThe asset acquired is recorded at the fair value of the consideration given or the fair value of the asset acquired, whichever is more clearly evident.•Issuance of equity securities•Deferred payments•Donated Assets•ExchangesNoncash AcquisitionsIssuance of Equity Securities•Asset acquired is recorded at the fair value of the asset or the market value of the securities, whichever is more clearly evident.•If the securities are actively traded, market value can be easily determined.•If the securities given are not actively traded, the fair value of the asset received, as determined by appraisal, may be more clearly evident than the fair value of the securities.Donated Assets•On occasion, companies acquire assets through donation.•The receiving company is required to record –The donated asset at fair value.–Revenue equal to the fair value of the donated asset.Example 5On January 1, 2011, Byner Company purchased a used tractor. Byner paid $5,000 down and signed a noninterest-bearing note requiring $25,000 to be paid on December 31, 2013. The fair value of the tractor is not determinable. An interest rate of 10% properly reflects the time value of money for this type of loan agreement. The company’s fiscal year-end is December 31.•Prepare the journal entry to record the acquisition of the tractor.•How much interest expense will the company include in its 2011 and 2012 income statements for this note?•What is the amount of the liability the company will report in its 2011 and 2012 balance sheets for this note?Example 5: ContinuedPrepare the journal entry. PV(FV=25,000, pmt=0, n=3, i=10%) = 18,783Tractor ($5,000 cash + $18,783 note) 23,783Discount on note payable (difference) 6,217Cash 5,000Note payable (face amount) 25,000How much interest expense will the company include in its 2011 and 2012 income statements for this note?2011: Interest expense ($18,783 x 10%) = $1,8782012: Interest expense [($18,783 + $1,878) x 10%] = 2,066What is the amount of the liability the company will report in its 2011 and 2012 balance sheets for this note?2011: $25,000 – ($6,217 – $1,878) = $20,6612012: $25,000 – ($6,217 – $1,878 – $2,066) = 22,727DispositionsSteps:1. Update depreciation to date of disposal.2. Remove original cost of asset and accumulated depreciation from the books.3. Record what you received.4. The difference between book value of the asset and the amount received is recorded as a gain or loss.ExchangesGenerally cost of asset acquired is: –fair value of asset given up plus cash paid or minus cash received or–fair value of asset acquired, if it is more clearly evident•In the exchange of operational assets, fair value is used except in rare situations in which the fair value cannot be determined or the exchange lacks commercial substance.•When fair value cannot be determined or the exchange lacks commercial substance, the asset(s) acquired are valued at the book value of the asset(s) given up, plus (or minus) any cash exchanged. No gain is recognized.Example 6Southern Company owns a building that it leases. The building’s fair value is $1,400,000 and its book value is $800,000 (original cost of $2,000,000 less accumulated depreciation of $1,200,000). Southern exchanges this for another building owned by the Eastern Company. The building’s book value on Eastern’s books is $950,000 (original cost of $1,600,000 less accumulated depreciation of $650,000). Eastern also gives Southern $140,000 to complete the exchange. The exchange has commercial substance for both companies. Prepare the journal entries to record the exchange on the books of Southern.Cash 140,000Building - new ($1,400,000 - 140,000) 1,260,000Accum deprec - building (acct balance) 1,200,000Building - old (acct balance) 2,000,000Gain ($1,400,000 – 800,000) 600,000Example 6: ContinuedSouthern Company owns a building that it leases. The building’s fair value is $1,400,000 and its book value is $800,000 (original cost of $2,000,000 less accumulated depreciation of $1,200,000). Southern exchanges this for another building owned by the Eastern Company. The building’s book value on Eastern’s books is $950,000 (original cost of $1,600,000 less accumulated depreciation of $650,000). Eastern also gives Southern $140,000 to complete the exchange. The exchange has commercial substance for both companies. Prepare the journal entries to record the


View Full Document

SMU ACCT 3311 - Lecture Notes

Download Lecture Notes
Our administrator received your request to download this document. We will send you the file to your email shortly.
Loading Unlocking...
Login

Join to view Lecture Notes and access 3M+ class-specific study document.

or
We will never post anything without your permission.
Don't have an account?
Sign Up

Join to view Lecture Notes 2 2 and access 3M+ class-specific study document.

or

By creating an account you agree to our Privacy Policy and Terms Of Use

Already a member?