I.Types of Operational Assets- Actively Used in Operations, Expected to Benefit Future Periods
A. Property, Plant, Equipment -tangible
B. Natural Resources-tangible, not man-made
B. Intangible-No PhysicalSubstance
II.Expenditures-capital expenditures (dr to asset), revenue expenditures(dr to expense)
Expenditures incurred prior to use, General Rule-The initial cost of an operational asset
includes the purchase price and all normal expenditures necessary to bring the asset to its
desired condition and location for use. Capital expenditures.
1.Equipment-Net purchase price, Taxes, Transportation costs, Installation costs,
Modification to building necessary to install equipment, Testing and trial runs
2.Land-Purchase price, Real estate commissions, Attorney’s fees, Title search, Title
transfer fees, Title insurance premiums, Removing old buildings
3.Land Improvements-Separately identifiable costs of Driveways, Parking lots, Fencing,
Landscaping, Private roads
4.Buildings-Purchase price, Attorney’s fees, Commissions, Reconditioning
Purchase price, exploration and development costs of: Timber,
Mineral deposits, Oil and gas reserves. Asset Retirement Obligations-Often encountered
with natural resource extraction when the land must be restored to a useable condition.
Recognize as a liability and a corresponding increase in the related asset. Record at fair
value, usually the present value of future cash outflows associated with the reclamation
6.Intangible Assets-Record at current cash equivalent cost, including purchase price,
legal fees, and filing fees.