Property Plant and Equipment

Property Plant and Equipment - PROPERTY, PLANT,AND...

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PROPERTY, PLANT,AND EQUIPMENT Lesson Nine
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ACQUISITIONS z The cost of an asset is the cost of bringing it to its intended use. z When costing an asset, think of all of the parts needed to make it function. z Cost can also include delivery, installation, and sales taxes.
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ACQUISITIONS z Examples of costs that might be added to a truck: Door signs Trailer hitch Radio Wooden Rails
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ACQUISITIONS Basket Purchase of assets: a- You purchased land and a building for $320,000. b- The land was appraised at $100,000. c- The building was appraised at $300,000. How should the acquisition be recorded?
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Acquisitions You cannot record the transaction at $400,000 because that exceeds its cost.
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Acquisitions z Basket Purchase of Assets: Appraisal Cost Allocated Cost Land 100,000 ¼ x 320,000 = 80,000 Building 300,000 ¾ x 320,000 = 240,000 400,000 320,000
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Acquisitions Land 80000 Building 240000 Cash 320000
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DEPRECIATION – STRAIGHT-LINE Straight-Line Depreciation: Cost – Salvage = Depreciation per year Life If the asset is owned for less than a year, prorate the depreciation
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You bought a truck on January 1, 2001 for $45,000. It had a salvage of $3,000 and a life of 3 years. 45000 – 3000
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Property Plant and Equipment - PROPERTY, PLANT,AND...

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