CMA Exam

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  1. Equipment Costs - Costs associated with obtaining new assets and placing them in operations are capitalized
    Includes: purchase price, transportation costs and installation costs. Costs of trail runs and spoilage or defective products resulting from such runs are also capitlialized
  2. Land - Land Costs include the initial acquisition costs and all expenditures required to bring the land ot its intended use
    • Commissions to real estate agents; clearing; drainage; and land survey fees. cost of demolition and salvage are capitalized.
    • Improvements are capitalized
  3. Building Costs - Acquired in 3 ways
    1. purchased already contructed
    2. Build by indepent contractor
    3. contructed by company
    • 1. Purchased already constructed - allocate using percentage of fair value. ie if cost is 1 mil but combined FV 1.2mil. get percentage and allocate appropriately.
    • 2. Built by contractor - all costs are capitalized
    • 3. Self Constructed - DM and DL and OH by POR.
  4. Acquiring Asset through an Exchange
    • 1. Determine if there are commercial substance (is the Cash Flow expected to change due to the exchange), considered commercial if configuratno of CF of received asset differs from CF of the asset transferred; entity's value of the operations change as the result of the exchange and difference of the two is significant compare to assets exchanged.
    • 2. Accounted for using the FV of the asset given up. or FV of the asset received if it has more accurate FV. Any gain or loss recognized at the time of exchange.

    If it lacks commercial value - accounted for at BV of the asset given up.
  5. Acquiring thorugh exchange of stocks
    basis of valuation is through FV of the asset acquired. If cannot be determined, FV of the shares exchanged.

    ASPE, FV of assets acquired or FV of consideration given.
  6. Donations and Gifts -
    Depends on receiving depreciable or non-depreciable.

    Depreciable - Cost Reduction (credit the asset directly for the amount received, not record the asset) or Deferral approach, deferred revenue account that would be amortized ot income on a systematic basis over the life of the asset.

    Non-depreciable - recognize FV on the BS and credit OCI or recognize FV of land and recognize full amount as revenue.
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CMA Exam
2013-06-06 01:26:39
CMA Exam

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