What would be the proper way to handle these assets

Assignment Help Financial Accounting

Reference no: EM13183549

A manufacturing company was to purchase various capitalizable spare parts(some of which could be very expensive) for its manufacturing equipment(as a precautionary measure for future mechanical break down) what would be the proper way to handle these assets?

1) Would I segregate them on the balance sheet as non revenue producing assets, not depreciate them but instead analyze them for impairment annually and then potentially write them down annually.

2) Or would I start depreciating them immediately based on the argument that their idleness would be temporary(but who knows for how long and maybe some for years or never), they are needed for ongoing business continuity reasons(there would be a potential lead time to get new parts) and the idle assets could in fact lose value over time(even if not used) due to obsolescence and the like.a

Reference no: EM13183549

Questions Cloud

Carbon monoxide reacts completely with o : Carbon Monoxide at a pressure of 720 mmhg reacts completely with O2 at a pressure of 360 mmhg in a sealed vessel to produce

Explain the water layer into the octanol layer : The log P value for nicotine is 1.09. If 20 mL of 0.10 g/mL nicotine solution in water is extracted with 20 mL of octanol, how much nicotine is removed from the water layer into the octanol layer?

Record the treasury stock transactions in t accounts : What is the reasoning behind treating the purchase of treasury stock as a reduction in stockholders' equity as opposed to treating it as an investment asset?

Find out the composition of the fuel : a fuel oil is composed of C10H22 and C12H26 when the fuel oil ios burned with 20% excess air the ratio of water to CO2 is found to be 1.088.

What would be the proper way to handle these assets : Would I segregate them on the balance sheet as non revenue producing assets, not depreciate them but instead analyze them for impairment annually and then potentially write them down annually.

Prepare a statement of cash flows for year ended : Prepare a statement of cash flows for year ended December 31, 2014. Use the indirect method for cash flows from operating activities and how can users of financial statements utilize statement of cash flows in making informed decisions?

What is the most unbiased tool random selection : When is a stratified sample an appropriate sampling technique? specific characteristics of the population are of no concern individuals in a population are not equal each member must have an equal chance of being selected you have a small population ..

Make an income statement for the year ended : Discuss, with reasons, which accounting concepts and conventions you have used in the preparation of the financial statements.

State changing the conditions of the reaction can alter : Changing the conditions of the reaction can alter the value of the change in free energy (?G). Sort the following conditions as to whether each would decrease the value of ?

User Account

All Pages