Assets

Unit Five

Learning Objectives Unit Five

to understand the definition of assets; to understand the classification of assets.

One hospital maintains an auxiliary generator for use in electrical outages. Such outages are rare, and the generator has not been used for the past two years. Should the generator be reported as a fixed asset on this hospital’s balance sheet?

Warming-up Unit Five

Text Skimming

1. Please describe the definition of assets.

2. How many kinds can the assets be divided into? What are they?

3. What are short-term investments ?

4. What do the receivables and prepayments include?

5. What do inventories refer to ? How many methods are there if inventories are issued ?

6. What are long-term investments? What do they include?

7. Many methods are used to allocate the cost of plant assets to accounting periods through depreciation. What are they? And describe them.

8. What are intangible assets?

Vocabulary Unit Five intangible deferred subsequent administrative obligationconversion category utilizationexpenditure renovationsalvagedepreciationamortize

无形的 延期的 后来的，其次的 管理的；行政的 义务 变换；转化；换算 种类 利用，使用 支出，消费 修理 残 ( 货价 ) 值 折旧 摊销，分期偿付

Presentation

Assets

Assets are economic resources, which are measurable by money value, which are owned or controlled by an enterprise, including all property, rights as a creditor to others, and other rights.

assets

current assets

long-term assets

Current assets

They are assets that are expected to be converted to cash, sold, or consumed during the next 12 months or within the business normal operating cycle if longer than a year.

Current assets cash on handcash in bankmarketable securitiesreceivables and prepayments inventory

Short-term investments They refer to various marketable

securities, which can be realized at any time and will be held less than a year, as well as other investments with a life of no longer than a year.

Receivables and prepayments notes receivable accounts receivable other receivables accounts prepaid prepaid expenses

two major types of receivables

Inventories

Inventories refer to merchandise, finished goods, semi-finished goods, goods in process, and all kinds of materials, fuels, containers, low-value and perishable articles and so on that stocked for the purpose of sale, production or consumption during the production operational process.

When inventories are issuing, enterprises may account them under the following methods:

first-in first-outweighted averagemoving averagespecific identification last-in first-out

Long-term assets

They refer to those assets that will be realized or consumed within a period longer than one year of their acquisition, which are normally divided into long-term investments, fixed assets, intangible assets and deferred assets.

Depreciable assets

Depreciable assets are tangible assets used by a business in the production of goods and services. Except for land, the typical fixed assets have a limited life span. Depreciation is calculated by subtracting estimated salvage value from cost and allocating the remainder over the expected life span.

Many methods are used to allocate the cost of a plant asset to accounting periods through depreciation. Each of them is appropriate for certain circumstances. The most common methods are :

① the straight-line method ② the production method ③ two accelerated methods known

as the sum-of –years’-digits method and the declining-balance method.

Intangible assets

They are special rights to current and expected future benefits from patents, copyrights, trademarks, franchises, leaseholds.

Deferred assets

They refer to all the expenses that could not be accounted as current profit or loss totally but should be periodically amortized in future years, including organization expenses, expenditures incurred in major repair and improvement of the rented in fixed assets, etc.

Notes Unit Five intangible asset: assets that are saleable though not material

or physical 无形资产，或称 immaterial asset 。它是指没有实物形态的资本性资产，其价值反映了企业所拥有的权益和未来的收益，如版权、专利、商标、信誉等。

Current assets are assets that are expected to be converted to cash, sold, or consumed during the next 12 months or within the business’ normal operating cycle if longer than a year. Current assets of enterprises shall include cash on hand, cash in bank, marketable securities, receivable, prepayments and inventory.

流动资产是预期能在一年或超过一年的一个营业周期内变现、出售或耗用的资产。企业的流动资产，包括库存现金、银行存款、有价证券、应收账款、预付账款以及存货。

Notes Unit Five

Receivables and prepayments include notes receivable, accounts receivable, other receivables, accounts prepaid and prepaid expenses, etc.

应收及预付款各项包括：应收票据、应收账款、其他应收款、预付账款、待摊费用等。

Provision for bad debts may be set up on accounts receivable and the provision for bad debts shall be shown as a deduction item of accounts receivable in the financial statement.

应收账款可以计提坏账准备金。坏账准备金在会计报表中作为应收账款的备抵项目列示。

Inventories refer to merchandise, finished goods, semi-finished goods, goods in process, and all kinds of materials, fuels, containers, low-value and perishable articles and so on that stocked for the purpose of sale, production or consumption during the production operational process.

存货是指企业在生产经营过程中为销售或耗用而储存的各种资产，包括商品、产成品、半成品、在产品以及各类材料、燃料、包装物、低值易耗品等。

long-term asset 即 long-lived asset, 也 是 指 固 定 资产。 Furniture and fixtures 家具和装修，家具指办公所许的桌子、椅子、办公柜等器具；装修指室内壁纸、吸音板、吊灯等装潢设施。

Notes Unit Five

Fixed assets refer to the assets whose useful life is over one year, unit value is above the prescribed criteria and where original physical form remains during the process of utilization, including building and structures, machinery and equipment, transportation equipment, tools and implement, etc.

固定资产是指使用年限在一年以上，单位价值在规定标准以上，并在使用过程中保持原来物质形态的资产，包括房屋及建筑物、机器设备、运输设备、工具器具等。

Notes Unit Five

tangible asset 有形的固定资产，也称有实体的固定资产。它与无形固定资产构成固定资产总体。 ( 本单元没有 , 如果中间有 plant)

plant and equipment 厂房和设备。这是指企业在生产和经营的过程中所使用的固定资产，包括土地、厂房、机器、设备、运输工具等。与 fixed asset 和下文的 property, plant and equipment 意思一样。狭义的 plant 是指厂房。

Notes Unit Five

Assets

Unit Five

Review

1. Ask students to read all the new words and phrases.

2. Review the language points.

Exercises Unit Five

I. Choose the best answer.

1. When specific funds are borrowed to pay for construction of assets that qualify for capitalization of interest, the excess funds not needed to pay for construction may be temporarily invested in interest-bearing securities. Interest earned on these temporary investments should be:

A. offset against interest cost incurred during construction.

B. used to reduce the cost of assets being constructed.

C. multiplied by an appropriate interest rate to determine the amount of interest to be capitalized.

D. recognized as revenue of the period.

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Exercises Unit Five

2. For a non-monetary exchange of plant assets, if the exchange lacks commercial substance, accounting recognition should not be given to:

A. a loss when the assets exchanged.

B. a gain when the assets exchanged.

C. part of a gain when the assets exchanged and cash is received.

D. no gain or loss.√

Exercises Unit Five

3. The book value of an asset classified as plant and equipment is obtained by:

A.deducting accumulated depreciation from the revenue the asset has produced.

B.deducting accumulated depreciation from the original cost of the asset.

C.deducting accumulated depreciation from the original cost of the asset less its salvage value.

D.deducting the original cost of the asset from its current market value.

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Exercises Unit Five

4. Plant assets purchased in exchange for issuing a zero-interest-bearing note should be accounted for at the:

A.face value of the note.

B.fair value of the asset received.

C.book value of the asset received.

D.present value of the note.√

Exercises Unit Five

5. Upon purchase of certain depreciable assets used in its production process, a company expects to be able to replace these assets by adopting a policy of never declaring dividends in amount larger than net income. If a net income is earned each year, recording depreciation will coincidentally result in retention of sufficient assets within the enterprise. If in liquid form, these assets could be used to replace those fully depreciated assets if:

A.prices remain reasonably constant during the life of property.

B.prices rise through the life of property. C.the retirement depreciation system is used. D.obsolescence was an unexpected factor in bringing about

retirement of the assets replaced.

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Exercises Unit Five

6. W Company determines that a printing press used in its operations has suffered a permanent impairment in value because of technological changes. An entry to record the impairment should be the excess of the carrying amount of an asset over the:

A.asset’s book value.

B.expected future net cash flows.

C.asset’s fair value.

D.higher of net realizable value wit present value of expected future net cash flows.

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Exercises Unit Five

7. Charging the cost of ordinary repairs to the machinery and equipment asset account during the current year would:

A.understate net income for the current year.

B.understate shareholders’ equity at the end of the current year.

C.not affect the total assets at the end of the current year.

D.not affect the total liabilities at the end of the current year.√

Exercises Unit Five

8. The intangible asset goodwill may be:

A.capitalized only when purchased.

B.capitalized either when purchased or created internally.

C.capitalized only when created internally.

D.written off directly to retained earnings.

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Assignments

Do Ex. Ⅱ in the exercise books.