Tutorial: Business Academy

Topic: Fixed Assets - Valuation

Prepared by: Ing. Jana Šustrová

Projekt Anglicky v odborných předmětech, CZ.1.07/1.3.09/04.0002

je spolufinancován Evropským sociálním fondem a státním rozpočtem

České republiky.

Purchase price Actual costs Replacement cost

Purchase price is the value of acquired property.The price includes the costs associated with acquisition – it comprises such costs as the following ones:◦ transport◦ customs duty◦ commission◦ assembly◦ exploration, geological and geodetic work◦ project work◦ administrative fees◦ costs associated with bringing the assets into

use

◦Penalties, default interest, damage caused in connection with the acquisition of property

◦Expenditure on training staff to use new assets

◦Expenditure on supplies◦Expenditure incurred after putting the

assets into use◦Exchange differences on foreign currency

purchase

It is used for valuation of the property which the company acquired as a result of its own activities (e.g. a warehouse built by the employees, a special apparatus made by the employees, etc.)

Includes all direct costs and a part of indirect costs which were spent on production of assets ◦ direct material◦ direct wages◦ indirect (overhead) costs

It is used for valuation of the property acquired free of charge, e.g.

gift shareholder´s investment newly identified in inventory

It is the price at which the asset would be acquired at the accounting time.

It is determined on the basis of professional expertise.

The price of fixed assets can be increased by technical evaluation, i.e. expenditures for extensions, reconstruction and modernization of the assets, if they exceeded the amount of CZK 40,000 in one accounting period.

ATTENTION! Do not confuse with the repair and maintenance!!!

Repair, maintenance = fault removing, worn-out reducing

Reconstruction = changing the purpose or technicalparameters of the asset

Modernization = extension of the equipment and usability of the asset

By subsidies received from the state budget, municipality or city budget

By the value of wearing-out of fixed assets, i.e. accumulated depreciation = book value

The company purchased a new machine on the invoice; the invoiced amount is CZK 320,000. Transportation fee was CZK 5,000, installation fee was CZK 12,000. Training for the staff who will operate the new machine cost CZK 3,500.

Find out the purchase price of the new machine.

1. Purchase price

2. Replacement cost

3. Actual costs

A. Donation of property

B. Shareholder´s deposit

C. Own production

D. Purchase

Choose the items that are part of the cost of the fixed assetsa) project for the construction of a production hallb) transportation of procured machinery c) exchange-rate differences when buying abroad d) fee for building permits e) training of workers to service machine f) equipment inventory of fixed assetsg) payment of damages caused in building the foundations for a new

building Technical evaluation of the tangible property by a) cargob) increasing the price of fixed assets c) lowering the price of fixed assets As the technical evaluation of the tangible property shall be

considered expenditure on a) the total repair of tangible assets b) the total repair of tangible property if the value for the financial year

exceeds the amount of CZK 40 000,--c) construction, reconstruction and modernization

Zákon č. 563/1991 Sb., o účetnictví