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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Understanding Operating Assets

Descriptions of operating assets are listed below.

a. Naturally occurring materials that have economic value

b. Tangible assets that can be seen and touched

c. Do not have physical substance

d. Depreciated over the accounting periods in which the asset is used and benefits are received

e. Generally result from legal and contractual rights

Required:

Identify the category of operating asset associated with each description as property, plant, and equipment; intangible assets; or natural resources.

To determine

Operating assets are classified into three categories they are Property Plant and equipment, Intangible assets and natural resources.

To compute:

To identify the category of operating assets.

Explanation
  1. Naturally occurring material that have economic value: This belongs to Natural resources category of operating asset. Natural resources are naturally occurring materials, extracted from earth that has economic value. They include deposits such as coal and oil. They are depreciated over the period in which such asset is used and benefits are derived.
  2. Tangible assets that can be seen and touched: This belongs to Property, Plant and Equipment category of operating asset. Property Plant and equipment (PP&E) often called as fixed assets are tangible operating assets that can be physically witnessed and touched. They include among other things land, buildings, machines and automobiles.
  3. Do not have physical substance: This belongs to Intangible asset category. Intangible assets are usually result of Legal and contractual rights. They do not possess any physical substance...

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