201Lec09 - 201Lec09.PPT Long - Lived Assets Property, Plant...

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201Lec09.PPT 1 Long - Lived Assets Long - Lived Assets Ha ve  phys ic a l s ub s ta nc e Used Used  in b us ine s s       (no t jus t inve s tm e nt) No t fo r s a le  to  c us to m e rs No t fo r s a le  to  c us to m e rs C o ns is t o f: le g a l rig hts pro c e s s e s   na m e  re c o g nitio n pa tie nt lis ts c o ntra c ts lic e ns e s e tc Property, Plant & Property, Plant & Equipment (PP&E) Equipment (PP&E) Property, Plant & Property, Plant & Equipment (PP&E) Intangible Assets Intangible Assets Assets Intangible Assets
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Improvements,   c a lle d c a pita l e xpe nditure s ,   a re  a dde d to  the  a s s e t a c c o unt.              Extend  life, efficiency or capacity  Repairs , m a inte na nc e  a nd re c urring         c o s ts   a re  e xpe ns e d im m e dia te ly.            Called revenue  expenditures . Record  Depreciation Expense e a c h ye a r if   a s s e t ha s  a   lim ite d life . 2 GAAP rules and issues regarding PP&E GAAP rules and issues regarding PP&E GAAP rules and issues regarding PP&E GAAP rules and issues regarding PP&E Purchase - c o m pa nie s  m us t re c o rd pla nt a s s e ts  a t  cost       Cost  c o ns is ts  o f a ll e xpe nditure s  ne c e s s a ry to   a c q uire  a n  a s s e t a nd m a ke  it  re a dy fo r us e
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Land (not land  improvements . See later) Determining the Cost of Plant Assets Determining the Cost of Plant Assets Determining the Cost of Plant Assets Determining the Cost of Plant Assets De b it the  la nd a c c o unt fo r c o s ts  s uc h a s : 1) the  c a s h purc ha s e  pric e ,  2) c lo s ing  c o s ts  s uc h a s  title  a nd a tto rne y’s  fe e s ,  3) re a l e s ta te  b ro ke rs ’ c o m m is s io ns , a nd  4) Ac c rue d pro pe rty ta xe s  a nd o the r lie ns  o n the  la nd  a s s um e d b y the  purc ha s e r. 5) C o s ts  to  pre pa re  the  la nd fo r us e  s uc h a s  g ra ding ,  filling , c le a ring , ra zing  ne t o f s a lva g e  pro c e e ds La nd ha s   unlimited life s o   NO depreciation e xpe ns e 3
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Land Improvements Determining the Cost of Plant Assets Determining the Cost of Plant Assets Determining the Cost of Plant Assets Determining the Cost of Plant Assets 4 Lim ite d us e ful live s . Expe ns e  (de pre c ia te ) the  c o s t o f la nd im pro ve m e nts  o ve r  the ir us e ful live s .    Exa m ple s  a re  drive wa ys ,  pa rking  lo ts , fe nc e s ,  la nds c a ping , a nd         unde rg ro und s prinkle rs .
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Buildings Determining the Cost of Plant Assets Determining the Cost of Plant Assets Determining the Cost of Plant Assets Determining the Cost of Plant Assets Purchase costs: Purchase price, closing costs (attorney’s fees, title insurance, etc.) and real  estate broker’s commission.
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201Lec09 - 201Lec09.PPT Long - Lived Assets Property, Plant...

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