chapter 9 - Plant Assets Plant assets are resources that...

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Plant Assets - Plant assets are resources that have physical substance, used for operations in business, and are not intended for sell. PPE, fixed assets, - Except land, assets decline in value over useful lives - Assets should be in good condition and replaced when worn out and expand productive assets as needed - Use the cost principle, which cconsits of all expenditures necessary to acquire an asset and make it ready for intended use - Revenue expenditures: if cost is not included in a plant asset and must be expensed immediately - Capital expenditures: costs included in a plant asset account - Sometimes companies have improperly capitalized expenditures that they should have expensed, ex: include costs in building instead of expensed in expense account - Cash equivlent price: fair value of asset given up or the fair value of asset received, whichever is more determinable. Land - cost of land includes cash purchase price, closing costs like title and attorney fee, real estate broker commission, and accrued property taxes and other liens on land assumed by purchaser. - Includes all costs incurred in making land ready for intended use. - Clearing, draining, filling, grading Land Improvements - additions made to land like parking lots, fencing, landscaping, sprinklers, all expenditures necessary to make improvements ready for their intended use. - Land improvements have limited useful lives, are depreciated Buildings - includes facilities like stores, factories, warehouses. - Costs incude purchase price, closing costs (attorney fee, insurance), real estate broker commission. - Contract price + architect fees, building permits excivation costs. - Interest costs during construction period only. Equipment - assets used in operations - cash price, sales taxes, freight charges, insurance during transit paid by purchaser, expenditures in installing, testing, To Buy or Lease - lessor: owner of an asset - lessee: uses an asset owned by lessor for limited time - advantages of leasing asset o reduced risk of obsolescnes
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This note was uploaded on 12/14/2011 for the course ACCOUNTING 100 taught by Professor 1 during the Fall '11 term at University of Wisconsin.

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chapter 9 - Plant Assets Plant assets are resources that...

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