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201A Study guide Ex 5 Ch 9, 10 Fall 07[1]

201A Study guide Ex 5 Ch 9, 10 Fall 07[1] - Study guide for...

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Study guide for Exam 5 (Ch 9,10) As always, you should know all terms and definitions used in the chapters. Long Lived Assets = Plant Assets + Intangible Assets Property, plant and equipment = plant and equipment = fixed assets = plant assets Chapter 9 Calculate the costs to be capitalized for different types of P,P & E cost consists of all expenditures necessary to acquire the asset and make it ready for its intended use Land : Cash price, closing costs, brokers’ commissions, accrued property taxes, etc. Can also include costs to raze a building, drain and fill the land. Proceeds from sale of salvaged materials are deducted from the cost Land Improvements: Drive ways, Parking lots, Fences, Underground sprinklers Buildings: All necessary expenditures relating to the purchase or construction of a building. When a building is purchased such costs include the: purchase price, closing costs (attorney's fees title insurance), real estate broker's commissions. If a building is purchased, but needs to be readied for its intended use , cost includes expenditures for remodeling rooms or offices, replacing or repairing roof, floors, electrical wiring, plumbing. When a building is constructed, its cost consists of: the contract price , architect's fees , building permits , excavation cost , interest costs during construction. Equipment: purchase price: sales tax , freight charges and insurance during transit paid by the purchaser , expenditures required in assembling , installing and testing the unit. Two criteria apply in determining the cost of equipment: the frequency of cost - one time or recurring . the benefit period - the life of the asset or 1 year Types and characteristics of assets included in P, P & E Reason for depreciating assets: The revenue-producing ability of an asset declines during its useful life because of wear and tear.   A decline in revenue producing ability may also occur because of obsolescence. Land does not depreciate.
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