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12 Cards in this Set
- Front
- Back
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property, plant, and equipment -- also referred to as...
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plant or fixed assets
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what are property, plant and equipment?
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land
building structures (buildings, offices, factories, warehouses) equipment (machinery, furniture, tools) |
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Major characteristics of property, plant, and equipment
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1. They are acquired for use in operations - not in resale
2. Long-term in nature and usually depreciated 3. Possess physical substance |
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Valuation for property, plant and equipment
- should not be revalued, unless impaired - gains and losses only recognized when sold |
Historical Cost
Costs related to getting it to its intended use -- freight costs, sales taxes, installation costs Additions to orig. cost = additions, improvements, replacements ONLY IS THEY PROVIDE FUTURE SERVICE POTENTIAL |
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Cost of Land
(reduction of price land can occur when there is any salvage receipts such as from demolishing a building) |
Purchase price, closing costs (such as title to land), attorney's fees, recording fees, getting the land conditioned for its intended use such as grading, filling, draining, clearing, assumption of: liens, mortgages, or encumbrances on property, and additional land improvements with INDEFINITE LIFE
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What are special assessments for local improvements?
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pavements, street lights, sewers, drainage systems
-these costs are charged to land b/c are relatively permanent in nature |
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Land improvements with limited lives
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private driveways, walks, fences, parking lots
- these costs are depreciated over time |
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Land held for speculation
Land held for resale |
-classified as an investment, not as property, plant, and equipment
-classified as inventory |
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Cost of buildings
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1) materials, labor and overhead costs incurred during construction 2) professional fees/permits 3) building if demolished AFTER land was ready for use!
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Cost of equipment
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purchase price, freight and handling charges, insurance while in transit, cost of special foundations if required, assembling and installation costs, costs of conducting trial tests
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Self Constructed Assets
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- no problem tracing direct costs
- but indirect: can either assign no fixed overhead at all OR a portion of all overhead to the construction process (full-costing approach) |
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0-0
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908
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