CH.9
Plant Assets
-Plant Assets are resources that have:
*Physical Substance (A definite size and shape)
*are used in operations of a business
*are not intended for sale to customers
*are expected to be of use to the company for a number of years

-Historical Cost Principle requires that companies record plant assets at cost.
*Cost consists of all expenditures necessary to acquire an asset and make it ready for its intended use

Determining the Cost of Plant Asset
-Land: All necessary costs incurred in making the land ready for its intended use increase (debit) the Land Account (cash of purchase price, closing cost such as title and attorney’s fees, real estate broker’s commissions, and accrued property taxes and other liens on land by the purchaser)
*Examples on slide 8*

-Land Improvements: Structural additions made to land. Costs include all expenditures necessary to make the improvements ready for their intended use.(Driveways, parking lots, fences, landscaping, and underground sprinklers)
*Limited useful lives
*Expenses (depreciate) the cost of land improvements over their useful lives

-Buildings: Includes all costs related directly to purchase or construction. Purchase costs: *Purchase price, closing costs, (attorney’s fees, title insurance, etc.) and real estate broker’s commission. *Remodeling and replacing or repairing the roof, floors, electrical wiring, and plumbing. Construction Costs: *Contract price plus payments for architects’ fees, building permits, and excavation costs.

-Equipment: Include all costs incurred in acquiring the equipment and preparing it for use.
*Costs typically include: Cash purchase price/ Sales Taxes/ Freight charges/ Insurance during transit paid by the purchaser/Expenditures required in assembling, installing, and testing the unit.

Depreciation
-Depreciation: Process of allocating to expense