acc6ch10 - Plant Assets and Intangibles Chapter 10 Plant...

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Plant Assets and Intangibles Chapter 10
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Asset Account on Related Expense Account the Balance Sheet on the Income Statement Plant Assets Land……………………………… none Buildings, Machinery and Equipment, Furniture and Fixtures, and Land Improvements………….… Depreciation Natural Resources………. .…… Depletion Intangibles ………………………. Amortization Plant Assets
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Measure the cost of a plant asset. Objective 1
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An asset must be carried on the balance sheet at the amount paid for it. The cost of an asset equals the sum of all of the costs incurred to bring the asset to its intended purpose, net of discounts Cost Principle
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Land and Land Improvements Purchase price of land $500,000 Add related costs: Back property taxes $40,000 Transfer taxes 8,000 Removal of buildings 5,000 Survey fees 1,000 54,000 Total cost of land $554,000
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Paving Fences Sprinkler systems Lights in parking lot Land Improvements All improvements located on the land but subject to decay:
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Buildings – Construction Architectural fees Building permits Contractor’s charges Materials Labor Overhead
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Buildings – Purchasing Purchase price Brokerage commissions Sales and other taxes Repairing or renovating building for its intended purpose
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Machinery and Equipment Purchase price less discounts Transportation charges Insurance in transit Sales and other taxes Purchase commissions Installation cost Expenditures to test asset before it is placed in service
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Lump-Sum Purchases Example Andrea Ortiz paid $110,000 for a combined purchase of land and a building. The land is appraised at $90,000 and the building at $60,000. How much of the purchase price is allocated to land and how much to the building?
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Lump-Sum Purchases Example Building: $60,000 ÷ $150,000 = 40% $110,000 × 40% = $44,000 Land: $90,000 ÷ $150,000 = 60% $110,000 × 60% = $66,000
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Does the expenditure increase capacity or efficiency or extend useful life? YES
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This note was uploaded on 11/09/2009 for the course FINANCE 330 taught by Professor Seri during the Spring '09 term at Birzeit University.

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acc6ch10 - Plant Assets and Intangibles Chapter 10 Plant...

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