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Unformatted text preview: Click to edit Master subtitle style C H A P T E R 10 ACQUISITION AND DISPOSITION OF PROPERTY, PLANT, AND EQUIPMENT Intermediate Accounting 13th Edition Kieso, Weygandt, and Warfield 1. Describe property, plant, and equipment. 2. Identify the costs to include in initial valuation of property, plant, and equipment. 3. Describe the accounting problems associated with self-constructed assets. 4. Describe the accounting problems associated with interest capitalization. 5. Understand accounting issues related to acquiring and valuing plant assets. 6. Describe the accounting treatment for costs subsequent to acquisition. 7. Describe the accounting treatment for the disposal of property, plant, and equipment. Learning Objectives Acquisition Acquisition costs: Land, buildings, equipment Self-constructed assets Interest costs Observations Valuation Cost Subsequent to Acquisition Dispositions Cash discounts Deferred contracts Lump-sum purchases Stock issuance Nonmonetary exchanges Contributions Other valuation methods Sale Involuntary conversion Miscellaneous problems Additions Improvements and replacements Rearrangement and reinstallation Repairs Summary Acquisition and Disposition of Property, Plant, and Equipment Property, Plant, and Equipment PP&E include land building structures (offices, factories, warehouses) equipment (machinery, furniture and tools). They are used in operations and not held for resale They are long term and are subject to depreciation ( except _____ ) They are tangible (physical substance) 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 _____________, reasons include: Acquisition of PP&E LO 2 Identify the costs to include in initial valuation of property, plant, 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. Historical Cost PPE is initially valued at historical cost at acquisition date, including: the assets cash or cash equivalent price (acquisition price), and the cost of readying the asset for its intended use . The purchase price, Freight costs, Sales taxes, Installation costs. Allocated to future periods through _____________ . Purchase price; Closing costs such as title, attorney, and recording fees; Cost of grading, filling, draining, and clearing the property; Assumption of any encumbrances on the property; and Any land improvements that have an indefinite Acquisition -- Land XYZ company purchased land with an old building on it at $120,000, to construct a new building on it. XYZ will have $10,000 cost to get rid of the old building and sell the scraps for $4,000....
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This note was uploaded on 05/25/2011 for the course ACCY 331 taught by Professor Madlinger,l during the Spring '08 term at Northern Illinois University.

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ch10_ins NIU F11 stu - Click to edit Master subtitle style...

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