Ch10n - 3 M ethods:2010 Oct 7 Accounting 220(Holmes Know i...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
3 Methods: Depreciation – Physical Asset Depletion – Natural Resource Amortization Expense - Intangible Know: RATIONAL SYSTEMATIC o u the depreciation rate for LAND - DO NOT USE IT! ON TEST! one prospectively. Changes are done when new information is acquired. ! Ordinary repairs are small and occur frequently. ON TEST! cial Statement prior to “Finalizing” it is called a Markup. em is immaterial and no further consideration is needed. ould you value it? What if you inherited it Oct. 7, 2010 Accounting 220 (Holmes) Notes Ch. 10 Plant Assets Characteristics: 1. Physical Substance 2. Used in the operations of a business 3. Not intended for sale to Customers Called: o Property, Plant, and Equipment o Plant and Equipment o Fixed Assets Expected to provide series to the company for a number of years Decline in service potential over their useful lives , except for Land Cost Principle requires Plant Assets be recorded at cost Cost consists of: All Expenditures necessary to acquire the asset and make it ready for its intended use (Purchase price, freight paid by purchaser, installation cost) Land – the site upon which the business is built: Cost consist of: o Cash Purchase Price o Closing Cost (Title and attorney’s fees) o Real Estate broker’s commissions o Accrued Property taxes and other liens assumed by the purchaser o All necessary cost incurred to make the land ready for its intended use (clearing, draining, filling, grading, demolition, removal cost less any proceeds from salvaged materials. Land Improvements – structural additions made to land - limited useful lives –depreciate over useful life o Companies capitalize the cost (p.44) o Limited Useful life Buildings – Facilities used in operations (p. 440) Debit Buildings Credit Mortgage or Notes Payable o Have limited useful lives –depreciated over the useful life o Cost Consist of: Purchased (purchase price, closing cost, attorney’s fees, title insurance, real estate commissions, remodeling, replacing, repairs) Construction limited to the construction period (contract price, architect fees, building permits, and excavation cost Interest Cost Debit Buildings Credit Mortgage After construction is complete Debit Insurance Expense Acct 220 Page 1
Background image of page 1

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

View Full Document Right Arrow Icon
Oct. 7, 2010 Accounting 220 (Holmes) Notes Ch. 10 Cash Equipment – Assets used in operations (p. 440) Cost Consist of: Cash purchase price Sales tax Assembling cost Installi ng Cost Testing Freight charges Insurance during transit paid by the purchaser Debit Factory Machine Credit Cash Cos t DOES NOT Consist of (Cost that are recurring expenses and that do not benefit future periods) (p. 440): Licenses, Accident insurance, Vehicles Debit: Delivery Truck License Expense Prepaid Insurance Credit Cash After construction is complete DEPRECIATION (p. 442) The process of allocating to expense the cost of a plant asset over its useful (service) life in a
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

Page1 / 8

Ch10n - 3 M ethods:2010 Oct 7 Accounting 220(Holmes Know i...

This preview shows document pages 1 - 3. Sign up to view the full document.

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