ch 10 Property plant and equipment

ch 10 Property plant and equipment - CH.10 ACQUISITION &...

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1 I. CHARACTERISTICS AND ACQUISITION. 1. CHARACTERISTICS. - ACQUIRED FOR USE AND NOT FOR RESALE. - LONG-TERM IN NATURE AND SUBJECT TO DEPRECIATION, EXCEPT FOR LAND. - POSSESS PHYSICAL SUBSTANCE. 2. ACQUISITION. 1) HISTORICAL COST IS THE USUAL BASIS FOR VALUATION. - COSTS OF OBTAINING THE ASSET AND GETTING IT READY FOR ITS INTENDED USE. 2) COMPONENTS OF COST. A. LAND. - ACQUISITION COST + SPECIAL ASSESSMENTS FOR RELATIVELY PERMANENT IMPROVEMENTS SUCH AS PAVEMENTS. - IMPROVEMENT WITH LIMITED LIVES ARE RECORDED SEPARATELY AS LAND IMPROVEMENTS AND DEPRECIATED OVER THEIR ESTIMATED LIVES. B. BUILDINGS. - ALL EXPENDITURES DIRECTLY RELATED TO ACQUISITION OR CONSTRUCTION ARE CAPITALIZED. C. EQUIPMENT. - INVOICE PRICE, FREIGHT CHARGES, INSURANCE WHILE IN TRANSIT, ASSEMBLY COSTS AND THE COST OF CONDUCTING TRIAL RUNS. D. SELF-CONSTRUCTED ASSETS. A) VALUATION PROBLEMS DUE TO ALLOCATION OF INDIRECT COSTS.
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2 - A PRO RATA PORTION OF THE FIXED OVERHEAD SHOULD BE ASSIGNED TO THE COST OF THE ASSET OBTAINED. - IF THE ALLOCATED OVERHEAD RESULT IN RECORDING CONSTRUCTION COSTS IN EXCESS OF THE MARKET PRICE, THE EXCESS OVERHEAD SHOULD BE RECORDED AS A PERIOD EXPENSE. B) RESEARCH AND DEVELOPMENT COSTS: BE EXPENSED WHEN INCURRED. C) INTEREST COSTS DURING CONSTRUCTION OF FIXED ASSETS.
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This note was uploaded on 02/23/2010 for the course ACCT 34131 taught by Professor Escobar during the Winter '10 term at CSU San Bernardino.

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ch 10 Property plant and equipment - CH.10 ACQUISITION &...

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