Chapter09 - 9-1 Chapter 9 PLANT AND INTANGIBLE ASSETS...

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BUSI1002KLT, 07/08 9-1 PLANT AND INTANGIBLE ASSETS Chapter 9
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BUSI1002KLT, 07/08 9-2 Long-lived assets acquired for use in business operations. Similar to long-term prepaid expenses The cost of plant assets is the advance purchase of services. As years pass, and the services are used, the cost is transferred to depreciation expense . Plant Assets
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BUSI1002KLT, 07/08 9-3 Major Categories of Plant Assets L a n d , b u i l d i n g s , e q u i p m e n t , f u r n i t u r e , f i x t u r e s . L o n g - t e r m a s s e t s h a v i n g p h y s i c a l s u b s t a n c e . T a n g i b l e P l a n t A s s e t s P a t e n t s , c o p y r i g h t s , t r a d e m a r k s , f r a n c h i s e s , g o o d w i l l . N o n c u r r e n t a s s e t s w i t h n o p h y s i c a l s u b s t a n c e . I n t a n g i b l e A s s e t s O i l r e s e r v e s , t i m b e r , o t h e r m i n e r a l s . S i t e s a c q u i r e d f o r e x t r a c t i n g v a l u a b l e r e s o u r c e s . N a t u r a l R e s o u r c e s
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BUSI1002KLT, 07/08 9-4 Acquisition. Acquisition. Allocation of the acquisition cost Allocation of the acquisition cost to expense over the asset’s to expense over the asset’s useful life (depreciation). useful life (depreciation). Sale or disposal. Sale or disposal. Accountable Events
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BUSI1002KLT, 07/08 9-5 Learning Objective LO1 To determine the cost of plant assets.
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BUSI1002KLT, 07/08 9-6 Asset price . . . for getting the asset to the desired location. . . . for getting the asset ready for use. Cost Acquisition of Plant Assets = Reasonable and necessary costs . . . +
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BUSI1002KLT, 07/08 9-7 On May 4, Heat Co., a stove maker, buys a new On May 4, Heat Co., a stove maker, buys a new machine from Supply Co. The new machine machine from Supply Co. The new machine has a price of $52,000. Sales tax is 8%. has a price of $52,000. Sales tax is 8%. Heat Co. pays $500 shipping cost to get the Heat Co. pays $500 shipping cost to get the machine to its plant. After the machine machine to its plant. After the machine arrives, set-up costs of $1,300 are incurred, arrives, set-up costs of $1,300 are incurred, along with $4,000 in testing costs. along with $4,000 in testing costs. Compute the cost of Heat Co.’s new machine. Compute the cost of Heat Co.’s new machine. Determining Cost
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BUSI1002KLT, 07/08 9-8 Determining Cost
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BUSI1002KLT, 07/08 9-9 Improvements to land such as driveways, fences, and landscaping are recorded separately. Cost includes real estate commissions, escrow fees, legal fees, clearing and grading the property. Land Improvements Land Special Considerations
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BUSI1002KLT, 07/08 9-10 Repairs made prior to the building being put in use are considered part of the building’s cost. Buildings Special Considerations Equipment Related interest, insurance, and property taxes are treated as expenses of the current period.
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BUSI1002KLT, 07/08 9-11 I think I’ll buy the whole thing; building, land, and contents. Special Considerations
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This note was uploaded on 04/20/2010 for the course BUSI BUSI1002 taught by Professor Drjasmine during the Spring '10 term at HKU.

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Chapter09 - 9-1 Chapter 9 PLANT AND INTANGIBLE ASSETS...

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