Chapter 10s

Chapter 10s - Plant Assets, and Intangibles Chapter 10...

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Unformatted text preview: Plant Assets, and Intangibles Chapter 10 Learning Objectives Account for the acquisition, depreciation, and disposal of plant assets. Account for intangible assets. Called Property, Plant, & Equipment Plant Assets Expected to Benefit Future Periods Actively Used in Operations Tangible in Nature Plant Assets Plant Assets as a Percent of Total Assets 5% 51% 59% 78% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% eBay Wal-Mart Anheuser- Busch McDonald's D e c l i n e i n a s s e t v a l u e o v e r i t s u s e f u l l i f e Use 2. Allocate cost to periods benefited. 3. Account for subsequent expenditures. Disposal 4. Record disposal Plant Assets Acquisition 1. Compute cost. Acquisition Cost All expenditures necessary to prepare the asset for its intended use Purchase price Cost Determination Land is not depreciable. Purchase price Real estate commissions Title insurance premiums Property taxes Surveying fees Title search and transfer fees Land Land Improvements Parking lots, driveways, fences, walks, shrubs, and lighting systems. Depreciate over useful life of improvements. Cost of purchase or construction Brokerage fees Taxes Title fees Attorney fees Buildings Purchase price Installing, assembling, and testing Insurance while in transit Taxes Transportation charges Machinery and Equipment On January 1, Matrix, Inc. purchased land and building for $200,000 cash. The appraised values are building, $162,500, and land, $87,500. How much of the $200,000 purchase price will be charged to the building and land accounts? Lump-Sum Asset Purchase The total cost of a combined purchase of land and building is separated on the basis of their relative market values . Appraised % of Purchase Apportioned Asset Value Value Price Cost a b * c b c Land 87,500 $ 35% 200,000 $ = 70,000 $ Building 162,500 65% 200,000 = 130,000 Total 250,000 $ 100% 200,000 $ * $87,500 $250,000 = 35% $162,500 $250,000 = 65% Appraised % of Purchase Apportioned Asset Value Value Price Cost a b * c b c Land 87,500 $ 35% 200,000 $ = 70,000 $ Building 162,500 65% 200,000 = 130,000 Total 250,000 $ 100% 200,000 $ * $87,500 $250,000 = 35% $162,500 $250,000 = 65% Lump-Sum Asset Purchase IFRS Choice between Historical cost method Revaluation method Depreciation is the process of allocating the cost of a plant asset to expense in the accounting periods benefiting from its use....
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Chapter 10s - Plant Assets, and Intangibles Chapter 10...

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