文档介绍：Chapter 9 Plant Assets and Depreciation
Chapter 9
Plant Assets and Depreciation
Plant Assets
Long-lived assets acquired for use in business operations3>.
Similar to long-term prepaid expenses
The cost of plant assets is the advance purchase of services.
As years pass, and the services are used, the cost is transferred to depreciation expense.
Major Categories of Plant Assets
Accountable Events
Acquisition.
Allocation of the acquisition cost to expense over the asset抯 useful life (depreciation).
Sale or disposal.
Acquisition of Plant Assets
Asset price
Reasonable and necessary costs . . .
. . . for getting the asset to the desired location.
. . . for getting the asset ready for use.
Cost
Determining Cost
Example
On May 4, Heat Co., an Ohio maker of stoves, buys a new machine from a pany. The new machine has a price of $52,000. Sales tax puted at 8%.
Heat Co. pays $500 shipping cost to get the machine to Ohio. After the machine arrives, set-up costs of $1,300 are incurred, along with $4,000 in testing costs.
Compute the cost of Heat Co.’s new machine.
Determining Cost
Example
Prepare the journal entry.
Determining Cost
Example
Special Considerations
Improvements to land such as driveways, fences, and landscaping are recorded separately.
Land Improvements
Cost includes real missions, escrow fees, legal fees, clearing and grading the property.
Land
Special Considerations
Repairs made prior to the building being put in use are considered part of the building抯 cost.
Buildings
Special Considerations
Equipment
Related interest, insurance, and property taxes are treated as expenses of the current period.
Special Considerations
I think I抣l buy the whole thing; barn, land, and animals.
Allocation of a Lump-Sum Purchase
Special Considerations
The total cost must be allocated to separate accounts for each asset.
The allocation is based on the relative Fair Market Value of each asset purchased.
Allocation of a Lump-Sum Purchase
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