ch10 - Learning Objectives Learning Objectives 1 2 3 4 5 6...

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10-1 1. Accounting issues related to acquiring and valuing plant assets. 2. Accounting issues associated with self-constructed assets. 3. Accounting issues associated with interest capitalization. 4. Accounting for asset exchange transactions 5. Describe the accounting treatment for costs subsequent to acquisition. 6. Describe the accounting treatment for the disposal of property, plant, and equipment. Learning Objectives Learning Objectives Learning Objectives Learning Objectives
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10-2 Used in operations ” and not for resale. Long-term in nature and usually depreciated. Possess physical substance . Property, plant, and equipment are assets of a durable nature. Other terms commonly used are plant assets and fixed assets . Property, Plant, and Equipment Property, Plant, and Equipment Property, Plant, and Equipment Property, Plant, and Equipment LO 1 Describe property, plant, and equipment. Includes: Land, Building structures (offices, factories, warehouses) , and Equipment (machinery, furniture, tools).
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10-3 Historical cost measures the cash or cash equivalent price of obtaining the asset and bringing it to the location and condition necessary for its intended use. Main reasons for historical cost valuation: Historical cost is reliable. Companies should not anticipate gains and losses but should recognize gains and losses only when the asset is sold. LO 2 Identify the costs to include in initial valuation of property, plant, and equipment.
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10-4 Includes all costs to acquire land and ready it for use. Costs typically include: Cost of Land LO 2 (1) purchase price; (2) closing costs, such as title to the land, attorney’s fees, and recording fees; (3) costs of grading, filling, draining, and clearing; (4) assumption of any liens, mortgages, or encumbrances on the property; and (5) additional land improvements that have an indefinite life.
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10-5 Improvements with limited lives , such as private driveways, walks, fences, and parking lots, are recorded as Land Improvements and depreciated. Land acquired and held for speculation is classified as an investment . Land held by a real estate concern for resale should be classified as inventory . LO 2 Identify the costs to include in initial valuation of property, plant, and equipment. Cost of Land
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10-6 Includes all costs related directly to acquisition or construction. Cost typically include: materials, labor, and overhead costs incurred during construction and professional fees and building permits. Cost of Buildings
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ch10 - Learning Objectives Learning Objectives 1 2 3 4 5 6...

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