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225property,plant,and equipment

225property,plant,and equipment - PROPERTY PLANT,AND...

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PROPERTY, PLANT,AND EQUIPMENT Lesson Nine
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ACQUISITIONS The cost of an asset is the cost of bringing it to its intended use. When costing an asset, think of all of the parts needed to make it function. Cost can also include delivery, installation, and sales taxes.
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ACQUISITIONS 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 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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DEPRECIATION – STRAIGHT-LINE You bought a truck on January 1, 2001 for $45,000. It had a salvage of $3,000 and a life of 3 years.
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