chapter10 - CHAPTER 10 Plant Assets, Natural Resources and...

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Chapter 10-1 Plant Assets, Natural Resources and Intangible Assets CHAPTER 10 ACCT100 Autumn 2011 Teresa Chu Chapter 10-2 Also call “Property, plant and equipment” OR “Plant and equipment” OR “Fixed assets” Features: (1) Possess physical substance (tangible) (2) Used in operations and not for resale (3) Long-term in nature and usually depreciable (except land) Examples: Land, buildings, equipments, machinery, trucks, furniture, etc. Plant Assets
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Chapter 10-3 COST PRINCIPLE: cost consists of all expenditures necessary to acquire asset and make it ready for its intended use Determining the Cost of Plant Assets LAND Purchase price Closing costs (e.g. title and attorney’s fees) Real estate brokers’ commissions Costs of grading, filling, draining and clearing Cost of removing unwanted buildings less any proceeds from sale of salvaged materials Accrued property taxes and any other liens Chapter 10-4 LAND IMPROVEMENTS Structural additions to land Examples: driveways, parking lots, fences, landscaping, underground sprinklers, etc. Limited useful live Record depreciation EQUIPMENT Examples: store check-out counters, office furniture, factory machinery, delivery trucks, airplanes, etc. COST = Purchase price + sales taxes + freight costs + insurance during transit + assemble costs + installation costs + testing costs For motor vehicles, exclude licenses and accident insurance
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Chapter 10-5 Examples: stores, offices, factories, warehouses, etc. Purchased building COST = Purchase price + closing costs + real estate broker’s commissions + costs of remodeling and replacing/repairing roof, floors, electrical wiring and plumbing Constructed building COST = Contract price + architects’ fees + building permits + excavation costs Include interest costs as “Buildings” if interest is incurred to finance construction of building that requires significant period of time to complete BUILDINGS Chapter 10-6 E10-3 On March 1, 2010, Penner Company acquired real estate on which it planned to construct a small office building. The company paid $80,000 in cash. An old warehouse on the property was razed at a cost of $8,600; the salvaged materials were sold for $1,700. Additional expenditures before construction began included $1,100 attorney’s fee for work concerning the land purchase, $5,000 real estate broker’s fee, $7,800 architect’s fee, and $14,000 to put in driveways and a parking lot. Instructions Determine amount to be reported as the cost of the land. For each cost not used, indicate the account debited.
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Chapter 10-7 Land Company paid $80,000 in cash. Old warehouse razed at a cost of $8,600 Salvaged materials were sold for $1,700. - 1,700 8,600 $80,000 Expenditures before construction began: $1,100 attorney’s fee for work on land purchase. $5,000 real estate broker’s fee.
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chapter10 - CHAPTER 10 Plant Assets, Natural Resources and...

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