ACT3391Fall2009handoutCH10

ACT3391Fall2009handoutCH10 - Notes related to Chapter 10...

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Notes related to Chapter 10 Property, plant, and equipment (PP&E) also known as fixed assets . Expenditures can be capitalized OR expensed. To acquire additional PP&E is also known as to make capital expenditures . Fixed assets: are acquired for use and NOT for resale are long-term in nature and depreciated (except for land) possess physical substance (this differentiates them from intangible assets) Land: not depreciated all expenditures made to acquire the land the to make it ready for its intended use are capitalized: the purchase price closing costs, e.g., attorney’s fees costs to get the land ready for its intended use, e.g., clearing trees, grading the land assumption of any liens on the property any additional land improvements that have an indefinite life, e.g., installing sewer lines Remember …. .. to some companies, land can be an investment OR an inventory item. all expenditures made to acquire the building/equipment and get it ready for its intended use Self-constructed assets: all costs incurred to get the asset into its intended use direct materials direct labor overhead any additional/incremental (variable) overhead costs a pro rata share of fixed overhead is generally allocated to self-construction projects – a common practice interest costs incurred during construction 1
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Capitalized interest : 1. Qualifying assets – assets built for a company’s own use OR large assets intended for sale or lease (inventory items such as HUGE ships or buildings or real estate developments) 2. The capitalization period starts when a. Expenditures for the asset have been made b. The construction process has started c. Interest costs are being incurred (there has to be some type of outstanding debt – note that a
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This note was uploaded on 03/31/2011 for the course ACCT 3391 taught by Professor Turpin during the Spring '10 term at Troy.

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ACT3391Fall2009handoutCH10 - Notes related to Chapter 10...

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