ch10A - PREVIEW OF CHAPTER 10 PLANT ASSETS, NATURAL...

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PREVIEW OF CHAPTER 10 PLANT ASSETS, NATURAL RESOURCES, AND INTANGIBLE ASSETS Plant Assets Determining the cost of plant assets Depreciation Expenditures during useful life Plant asset disposals Natural Resources Accounting for intangibles Research and development costs Intangible Assets
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Plant assets are tangible resources that (1) are used in operations of a business and (2) are not intended for sale to customers. Four classes: 1 Land 2 Land improvements 3 Buildings 4 Equipment PLANT ASSETS
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Plant assets are recorded at cost in accordance with the cost principle . Cost consists of all expenditures necessary to acquire the asset and make it ready for its intended use . These costs include purchase price , freight costs , and installation costs . DETERMINING COST OF PLANT ASSETS
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Cost is measured by the cash paid in a cash transaction or by the cash equivalent price when noncash assets are used in payment. The cash equivalent price is equal to the fair market value of the asset given up or the fair market value of the asset received , whichever is more clearly determinable. MEASURING COST OF PLANT ASSET
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The cost of Land includes: 1 cash purchase price 2 closing costs such as title and attorney’s fees 3 real estate brokers’ commissions 4 accrued property taxes and other liens on the land assumed by the purchaser. All necessary costs incurred in making land ready for its intended use are debited to the Land account. LAND
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COST OF LAND Sometimes purchased land has a building on it that must be removed to make the site suitable for construction of a new building. In this case, all demolition and removal costs less any proceeds from salvaged materials are chargeable to the Land account.
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The cost of land improvements includes all expenditures necessary to make the improvements ready for their intended use such as: 1 parking lots, paving 2 fencing, 3 lighting. LAND IMPROVEMENTS
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When a building is purchased , such costs include the purchase price, closing costs, and real estate broker’s commission. Costs to make the building ready for its intended use consist of expenditures for remodeling and replacing or repairing the roof, floors, wiring, and plumbing. BUILDINGS
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When a new building is constructed , cost consists of the contract price plus payments for architects’ fees, building permits, interest payments during construction, and excavation costs. BUILDINGS
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The cost of equipment consists of the cash purchase price, sales taxes, freight charges, insurance paid by the purchaser during transit, and all expenditures required in assembling, installing, and testing the unit . EQUIPMENT
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This note was uploaded on 05/21/2011 for the course ACY 1111 taught by Professor Km during the Spring '10 term at CUHK.

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ch10A - PREVIEW OF CHAPTER 10 PLANT ASSETS, NATURAL...

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