Acc011_AcquisitionOfProperty_Plant_Equipment

Acc011_AcquisitionOfProperty_Plant_Equipment - Acquisition...

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
Acquisition of Property, Plant and Equipment
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Capitalized Cost of Asset • Generally capitalize all costs necessary to acquire the asset and put in into operating condition.
Background image of page 2
Asset Basis Recorded at historical cost. Price of the asset, plus all costs of getting it ready for use. Include A. Purchase price, or cost of construction (materials, labor and pro rata share of overhead); do not include the internal costs of intangible assets, for example B. Freight or Delivery Charges C. Costs incurred in getting asset ready for use, examples include demolishing old building so that new building may be built and installation costs for equipment. D. Training on equipment E. Fees; Attorneys Fees, Brokers
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Asset Basis • Also include any costs incurred after acquisition, such as additions , improvements , or replacements that provide future service potential .
Background image of page 4
Property acquired through • Issuance of debt (deferred payment contracts) • Issuance of stock • Donation
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Deferred Payment Contracts • Assets purchased on long-term credit contracts should be accounted for at – their fair value or – the fair value of the liability on the date of the transaction, whichever is more reliable. • If neither is determinable, the asset should be recorded at the present value of the payments. • If no interest rate is stated or if the stated rate is
Background image of page 6
Property acquired through the issuance of stock. Record the exchange at the fair value of the – asset acquired or – the stock issued, whichever is more reliable.
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Example • Generous Motors gives Simple Simon 300 shares of stock in exchange for an innovative new patent. The current market value of the stock is $30 per share. What journal entry should we make to record the acquisition of the patent?
Background image of page 8
Property acquired through Donation • Assets acquired through donation should be recorded at their fair values.
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 35

Acc011_AcquisitionOfProperty_Plant_Equipment - Acquisition...

This preview shows document pages 1 - 10. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online