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21 Cards in this Set
- Front
- Back
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Plant Resources
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have a physical substance
are used in operation of business are NOT intended for sales to customer deliver potential over their useful life |
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Plant Assets are recorded at what?
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COST
Cost consists of all expenditures necessary to aquire the asset and make ready for its intended use |
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Types of Expenditures
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Revenue Expenditure- immediately charged against revenue as an expense
Capital Expenditure- increase the company's investment in plant assets |
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Land
Cost of land includes: |
cash, price, closing costs, broker's commissions, accrued property taxes,
costs to raze a building, drain, and fill land proceeds from sale of salvaged materials are deducted from the cost |
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Land Improvement
Cost of land improvements includes all expenditures necessary to make the improvements ready for their intended use |
driveways, parking lots, fences, underground sprinklers
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Building
all necessary expenditures relating to the purchase of construction of a building Purchase costs include and costs included for intended use: |
purchase price, closing costs (attorney's fees, title, insurance), real estate commission
intended use costs: roof, floors, electrical wiring, plumbing |
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Construction costs of building include:
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contract price, architects' fees, building permits, evacuation cost, interest costs during construction
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Equipment
Cost of equipment includes: |
purchase price, sales tax, freight charges and insurance during transit paid by purchaser, expenditures required in assembly, installing & testing the unit
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Cost
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all expenditures necessary to acquire the asset and make it ready for intended use
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useful life
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estimate of asset's value at the end of its useful life
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depreciation cost
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cost-salvage
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Straight-Line
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most widely used method of depreciation
depreciation is the same for every year with this method |
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annual depreciation expense for STRAIGHT-LINE=
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cost-salvage / useful life (in units of times)
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double-declining balance
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is an accelerated method
depreciation is the same for each year of the asset's useful life |
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Units of activity
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life of asset is expressed in terms of the total units of production or use expected asset
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annual depreciation expense units of activity:
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cost-salvage / useful life (total useful units of activity) = depreciation rate
depreciation rate * units during year = annual dep exp |
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Bonds
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a form of long-term liability
interest basing note payable issued by corporations, universities, and government agencies they are sold in small denominations (usually multiples of $1,000) which makes them attractive to investors |
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what is included in the form of a legal document of a bond?
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name of issuer, face value of the bond, contractual interest rate, and the maturity date
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Bond features:
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Secured bond- have specific assets pledges as collateral
unsecured bonds-do not have specific assets as collateral convertible bonds- may be converted into common stock bondholder's option callable bonds- are subjected to retirement at a stated dollar amount prior to maturity |
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Bonds may be issued at:
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Face Value- contractual rate (stated rate) = Market rate
Discount (below face value)- contractual rate < market rate....must discount price to get investors to buy Premium (above face value)- contractual rate > market rate....all investors want to own so the price is bid up |
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smile
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:)
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