ch10 - Chapter 10-1 C H A P T E R C H A P T E R 10 10...

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Unformatted text preview: Chapter 10-1 C H A P T E R C H A P T E R 10 10 ACQUISITION AND DISPOSITION OF ACQUISITION AND DISPOSITION OF PROPERTY, PLANT, AND EQUIPMENT PROPERTY, PLANT, AND EQUIPMENT Intermediate Accounting I Intermediate Accounting I Prof. Volkan Muslu Prof. Volkan Muslu Chapter 10-2 Used in operations and not for resale. Long-term in nature and usually depreciated. Possess physical substance. Property, plant, and equipment includes land, buildings, and equipment (machinery, furniture, tools). Major characteristics include: Property, Plant, and Equipment Property, Plant, and Equipment LO 1 Describe property, plant, and equipment. LO 1 Describe property, plant, and equipment. Chapter 10-3 Historical cost is reliable. Companies should not anticipate gains and losses but should recognize gains and losses only when the asset is sold. Valued at Historical Cost , reasons include: Acquisition of PP&E Acquisition of PP&E LO 2 Identify the costs to include in initial valuation of property, plant, LO 2 Identify the costs to include in initial valuation of property, plant, and equipment. and equipment. APB Opinion No. 6 states, property, plant, and equipment should not be written up to reflect appraisal, market, or current values which are above cost. Chapter 10-4 Includes all costs to acquire land and ready it for use: Cost of Land Acquisition of PP&E Acquisition of PP&E (1) the purchase price; (2) closing costs, such as title to the land, attorneys fees, and recording fees; (3) costs of grading, filling, draining, and clearing; (4) assumption of any liens, mortgages, or encumbrances on the property; and (5) land improvements that have an indefinite life. Chapter 10-5 Includes all costs related directly to acquisition or construction : Cost of Buildings (1) materials, labor, and overhead costs incurred during construction and (2) professional fees and building permits. Acquisition of PP&E Acquisition of PP&E Chapter 10-6 Include all costs incurred in acquiring the equipment and preparing it for use: Cost of Equipment (1) purchase price, (2) freight and handling charges (3) insurance on the equipment while in transit, (4) cost of special foundations if required, (5) assembling and installation costs, and (6) costs of conducting trial runs. Acquisition of PP&E Acquisition of PP&E Chapter 10-7 E10-1 : The following expenditures are related to land, land improvements, and buildings acquired for use in a business enterprise. Determine how they should be classified: Acquisition of PP&E Acquisition of PP&E (a) Money borrowed to pay building contractor (b) Payment for construction from note proceeds (c) Cost of land fill and clearing (d) Delinquent real estate taxes on property assumed (e) Premium on 6-month insurance policy during construction (f) Refund of 1-month insurance premium because construction completed early Classification Classification Notes Payable Notes Payable Building Building Land Land Land Land Building Building (Building) (Building) Chapter...
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ch10 - Chapter 10-1 C H A P T E R C H A P T E R 10 10...

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