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Chapter_9-student - 9 REPORTING AND ANALYZING LONG-LIVED...

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Chapter 9-1 REPORTING AND ANALYZING LONG-LIVED ASSETS Financial Accounting, Sixth Edition 9
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Chapter 9-2 1. Describe how the cost principle applies to plant assets. 2. Explain the concept of depreciation. 3. Compute periodic depreciation using the straight-line method Study Objectives
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Chapter 9-3 Plant assets are resources that have u physical substance (a definite size and shape), u are used in the operations of a business, u are not intended for sale to customers, u are expected to provide service to the company for a number of years, except for land. Plant Assets Referred to as property, plant, and equipment; plant and equipment; and fixed assets. Section One
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Chapter 9-4 Plant assets are critical to a company’s success Plant Assets Section One Illustration 9-1
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Chapter 9-5 Cost Principle - requires that companies record plant assets at cost. Cost consists of all expenditures necessary to acquire an asset and make it ready for its intended use. Determining the Cost of Plant Assets SO 1 Describe how the cost principle applies to plant assets.
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Chapter 9-6 All necessary costs incurred in making land ready for its intended use increase (debit) the Land account. Land Determining the Cost of Plant Assets Costs typically include: 1) cash purchase price, 2) closing costs such as title and attorney’s fees, 3) real estate brokers’ commissions, and 4) accrued property taxes and other liens on the land assumed by the purchaser. SO 1 Describe how the cost principle applies to plant assets.
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9-7 Illustration: Assume that Hayes Manufacturing Company acquires real estate at a cash cost of $100,000. The property contains an old warehouse that is razed at a net cost of $6,000 ($7,500 in costs less $1,500 proceeds from salvaged materials). Additional expenditures are the attorney’s fee, $1,000, and the real estate broker’s commission, $8,000. Required: Determine the amount to be reported as the cost of the land. Determining the Cost of Plant Assets
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This note was uploaded on 01/16/2012 for the course ACCT 2001 taught by Professor Lowe during the Spring '08 term at LSU.

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Chapter_9-student - 9 REPORTING AND ANALYZING LONG-LIVED...

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