Plant Assets, Natural Resources, and Intangible Assets
Nature of Plant Assets
resources that have physical substances
Used in the operations
of a business
for sale to customers.
property, plant, and equipment
plant and equipment
5. Plant assets are recorded
in accordance with the
Cost consists all expenditures necessary to acquire the asset and to make it
ready for the intended use
Expenditures that are unnecessary should be recorded as expenses or losses.
transaction, cost is measured by the cash paid.
assets are used in payment, cost is measured by the
fair market value
of the asset given up or the fair market value
of the asset
received, whichever is more clearly determined.
Cost of Plant Assets
cost of land
the cash purchase price,
closing costs such as title and attorneys’ fee
real estate broker’s commission
mortgage on the land assumed by the purchaser
demolition and removal cost of old building on land.
are structural additions made to land, the
the cost of a new parking lot,
fencing and lighting on the land
The cost of
costs related to the purchase or construction of a
purchase price, closing costs, and broker’s commission
remodelling or repairing the building for its
includes contract price, architects’ fees, building permits,
excavation costs, payments for material, labour, and overhead
cost of interest
on money borrowed to finance the
cost of machinery and equipment
the cash price, freight charges, and insurance during transit
cost in assembling, installing, and testing the equipment.
repairs and reconditioning before it is operated for
Note: Recurring costs such as licenses and insurance are expensed as incurred.
(Illustration 10-3, page 428; Illustration 10-4, page 429)