财务会计课件 from Professor CarterChapter09Word下载.docx

1、 Because property, plant, and equipment provide benefits through their physical form, they are examples of tangible assets. Some long-lived assets, such as copyrights, trademarks, and patents, are valuable because they provide legal benefits, not physical benefits. For example, you cannot drive arou

2、nd town in a copyright, but it does protect your company from other companies selling computer software your company developed. Resources that provide benefits in non-physical form are called intangible assets. In terms of the accounting equation, property, plant, and equipment are assets, as shown

3、below. The numbers in parentheses refer to the chapters in which the items are discussed.AssetsCurrent AssetsCash and cash equivalents （6）Accounts receivable （7）Allowance for Uncollectible Accounts （7）Merchandise inventory （8）Property, plant, and Equipment （9）=Liabilities+Stockholders EquityRevenues

4、Sales （7）Sales Returns & Allowances （7）Cost of Goods Sold （8）Operating ExpensesUncollectible Accounts Expense （7）Bank Service Expense （6）Other Revenues & ExpensesInterest Revenue （6）Interest Expense （6） The amount of property, plant, and equipment differs from company to company. For example, Exxon

5、Mobil, the largest oil and gas company in the United States, reported property, plant, and equipment of $139 billion on December 31, 2009. This $139 billion was approximately 60% of Exxon Mobils December 31, 2009 total assets. Royal Dutch Shell, the largest oil and gas company outside of the United

6、States, reported property, plant, and equipment of $132 billion on December 31, 2009. The $132 billion was approximately 45% of Royal Dutch Shells December 31, 2009 total assets. One year earlier, on December 31, 2008, Exxon Mobils property, plant, and equipment were $121 billion or approximately 53

7、% of Exxon Mobils total assets.The Nature of Property, Plant, and Equipment Property, plant, and equipment present difficulties for managers because they are often quite large in dollar amount and because they affect more than one accounting period. The large dollar amounts of property, plant, and e

8、quipment require managers to exercise much care before investing in such resources. For example, Exxon Mobil spent more than $57 billion on property, plant, and equipment during the three years ended December 31, 2009. To put this is perspective, consider during this three-year time period Exxon Mob

9、ils net income was approximately $108 billion. Thus, Exxon Mobil invested in property, plant, and equipment more than 50% of all additional resources its management generated through operating the company in the three years. When management makes decisions involving such large dollar amounts, they m

10、ust be very careful because the resources cannot be quickly generated through operations. If the property, plant, and equipment purchases prove to be mistakes, the company may have to operate for several years to recover the dollar amounts lost through poor decisions. A second difficulty presented b

11、y property, plant, and equipment is that as they are used up, the dollar amount used up in a given period must be reported as an expense on that periods income statement, similar to the manner in which supplies expense and insurance expense must be reported. This requires managers to be able to meas

12、ure the amount of the asset used up in any given period. Measuring the dollar amount of property, plant, and equipment used up is much more difficult than measuring the amount of supplies or prepaid insurance used up. For example, it is relatively easy to determine the amount of insurance Target use

13、d up in a year. This dollar amount is specified in the insurance contracts Target negotiated with its insurance companies. On the other hand, to determine the dollar amount of a Target store that has been used up in a year may be very difficult. Even though you know the building will eventually wear

14、 out or become too inefficient to be used, it is virtually impossible to determine how much of the wear and tear or obsolescence is due to any specific year. These and other accounting issues arising as a result of owning property, plant, and equipment will be explored in this chapter.Sources of Pro

15、perty, Plant, and Equipment There are two primary sources of property, plant, and equipment. First, companies convert some of their other resources into property, plant, and equipment. For example, after a company collects cash for its accounts receivable, it could use some cash to purchase a sales

16、terminal, computer, desk, or delivery truck. Secondly, companies borrow cash and use it to acquire property, plant, and equipment. For example, a company could borrow $10,000,000 from a bank and use the cash to buy land and a building. Of course, it is also possible for companies to acquire property

17、, plant, and equipment by obtaining cash from owners and then using the cash to obtain property, plant, and equipment. Although possible, this source is not nearly as common as companies converting other resources into property, plant, and equipment or borrowing cash to acquire them.Converting other

18、 resources into property, plant, and equipment When a company converts one or more resources into property, plant, and equipment, the effect on the company is its total resources and total sources of resources remain unchanged. For example, consider the effect of a company using $25,000 cash to purc

19、hase a delivery truck. The purchase of the delivery truck increases the companys resources （assets） by $25,000. On the other hand, the companys cash payment decreases its resources by $25,000. Thus, the companys total resources remain unchanged, as shown below.Total ResourcesSources of Borrowed Reso

20、urcesSources of Owner Invested ResourcesManagement Generated Resources+ $25,000- $25,000At the time the company receives the truck and pays for it, it would record an increase in the long-lived asset, Delivery Trucks, and a decrease in its cash resource. If you remember assets increase with debits a

21、nd a journal entry must have debits equal to credits, the process of recording the delivery truck purchase is quite simple, as shown below.DateDescriptionPostingRef.DebitsCreditsDec. 2Delivery Trucks17125,000Cash111Delivery truck purchaseIn actual business practice, companies use various account nam

22、es for recording property, plant, and equipment, such as a delivery truck. Other common account names include transportation equipment, autos and trucks, and delivery equipment.Borrowing resources to acquire property, plant, and equipment Due to the large dollar amounts often required for the purcha

23、se of property, plant, and equipment, most companies borrow cash to buy such assets. The cash is usually borrowed for many years. Hopefully, the property, plant, and equipment will generate more than enough cash to allow the companies to repay the amount borrowed and still have enough cash left for

24、the companies to use for other purposes. This is one way companies increase their resources over time. As will be explained in detail in Chapter 11, cash is often borrowed for long periods of time through companies issuing bonds. When companies issue bonds, they receive cash resources. Since the sou

25、rce of the cash was borrowing, bonds represent liabilities to the issuing company. For example, if a company borrows $10,000,000 cash by issuing $10,000,000 in bonds, the companys resources （cash） would increase by $10,000,000 and its sources of resources （bonds payable） would also increase by $10,0

26、00,000, as seen below.+ $10,000,000At the time the company receives the cash, it would record an increase in cash and an increase in its liability bonds payable. Since assets increase with debits and a journal entry must have debits equal to credits, the process of recording the receipt of cash is quite simple, as shown below.Dec. 910,000,000 Bonds Payable221Issue of long-term bonds If the company uses the $10,000,000 cash to buy l