Chap8Long-livedAssets(财务报表分析加州大学MBA).ppt

Short-lived and Long-lived Assets Short-lived assets a) On Jan. 1, buy insurance coverage for the year, and use it up by Dec. 31. In this case, the asset only lives within a year and the expenditure on the insurance coverage becomes expense right away. b) Inventory lives between the day of purchase and the day of being sold. The expenditure on inventory becomes expense when inventory is sold. Short-lived and Long-lived Assets Long-lived assets Production equipments are used for many years, they long live. The expenditure on equipments becomes expenses gradually（缓慢地）year after year. If the expenditure becomes expenses over many years, a challenging question is that how we allocate the total expenditure into expenses among these years. And how we allocate affects net income and total assets of these years. Long-lived Assets Income Statement Revenues COGS Depreciation expenses （折旧费用） … … Net Income Balance Sheet Assets Cash A/R Inventory Property, plants and equipments … Long-lived Assets- some terminologies Acquisition value of asset （获取价值）: all expenditures occurred to put the asset ready for use. For an equipment, it includes: price paid to manufacture, transportation fees, fees paid to technicians to adjust the equipment, expenditures to build a concrete base for the equipment,… Salvage value (residual value)（残留价值）: When the company no longer needs the equipment, the money it gets for disposing the equipment. If it sells the equipment, the money it receives from buyer net of any selling cost is salvage value; if it destroys the equipment, salvage value is ……? Long-lived Assets- some terminologies 3. Asset’s useful life: number of years that the asset is used in production. An machine may have useful life of 5 years, while an intangible asset (e.g., patent) may have useful life of 40 years. 4. Depreciation: the process of allocating the depreciation base over the years of the asset’s useful life. Long-lived Assets- some terminologies 5. Depreciation base: