Plant Asset
Life University
Chapter 4
Chapter Sections
1. 2. 3. 4. 5. 6. 7. Cost of plant assets Lump sum purchase Capital expenditure and Revenue expenditure Depreciation method Partial year Depreciation Revise estimate of salvage value and useful life Disposal of plant assets
Long Term Assets
• Plant Assets • Natural Resource • Intangible Assets
Plant Assets
• • • • Possess physical substance. Used in operation and not for resale. Long-term in nature Examples:
Land Land Improvement Building Equipment Furniture Tools………
Land
• Cost includes:
• • • • • the purchase price; title and attorney’s fees; brokers’ commissions; costs of grading, filling, draining, and clearing; assumption of any liens, mortgages, or encumbrances on the property.
• Cost of land is determined by
• All costs to acquire land • And all cost to ready it for use
• No Depreciation
Example
FedEx signs a $300,000 note payable to purchase 20 acres of land for a new shipping site. FedEx also pays in cash
– $10,000 for real estate commission, – $8,000 of back property tax, – $5,000 for removal of an old building, – $1,000 survey fee, and – $260,000 to pave the parking lot.
• Purchase price…………………………………… • Related cost
…………………………………………… …………………………………………… …………………………………………… ……………………………………………
• Total cost of land………………………………..
General Journal
Date Account Title and Explanation PR Debit Credit
Building
Purchased • • • • • • • Price Brokerage fee Tax Title fee Attorney fee Repairing Renovation Constructed • Material • Labor • Overhead
– – – – Heat Lighting Power Depreciation on machine used – Design – Permits – Insurance during construction
Machinery and Equipment
The costs include:
– Purchase price – Tax – Transportation – Insurance while in transit – Installing, Testing…
The cost = all cost for purchasing and preparing for intended use
Lump Sum Purchase
Plant assets are purchased in group with a single transaction for a lump sum
Chapter 4
Chapter Sections
1. 2. 3. 4. 5. 6. 7. Cost of plant assets Lump sum purchase Capital expenditure and Revenue expenditure Depreciation method Partial year Depreciation Revise estimate of salvage value and useful life Disposal of plant assets
Long Term Assets
• Plant Assets • Natural Resource • Intangible Assets
Plant Assets
• • • • Possess physical substance. Used in operation and not for resale. Long-term in nature Examples:
Land Land Improvement Building Equipment Furniture Tools………
Land
• Cost includes:
• • • • • the purchase price; title and attorney’s fees; brokers’ commissions; costs of grading, filling, draining, and clearing; assumption of any liens, mortgages, or encumbrances on the property.
• Cost of land is determined by
• All costs to acquire land • And all cost to ready it for use
• No Depreciation
Example
FedEx signs a $300,000 note payable to purchase 20 acres of land for a new shipping site. FedEx also pays in cash
– $10,000 for real estate commission, – $8,000 of back property tax, – $5,000 for removal of an old building, – $1,000 survey fee, and – $260,000 to pave the parking lot.
• Purchase price…………………………………… • Related cost
…………………………………………… …………………………………………… …………………………………………… ……………………………………………
• Total cost of land………………………………..
General Journal
Date Account Title and Explanation PR Debit Credit
Building
Purchased • • • • • • • Price Brokerage fee Tax Title fee Attorney fee Repairing Renovation Constructed • Material • Labor • Overhead
– – – – Heat Lighting Power Depreciation on machine used – Design – Permits – Insurance during construction
Machinery and Equipment
The costs include:
– Purchase price – Tax – Transportation – Insurance while in transit – Installing, Testing…
The cost = all cost for purchasing and preparing for intended use
Lump Sum Purchase
Plant assets are purchased in group with a single transaction for a lump sum