Longterm assets.docx

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Business Administration
Business Administration 2257

LONGTERM ASSETS PROPERTY PLANT AND EQUIPMENTDETERMINING THE COST OF PROPERTY PLANT AND EQUIPMENTMost companies record them at cost which includesoPrice taxesduties less discountsrebatesoExpenses needed to bring the asset to its required location and make it ready for use The costs are capitalized asset rather than expensed because it will provide future economic benefit oOperating Expenditure costs that only benefit the current period and are expensedoCapital Expenditure costs that benefit future periods and are capitalized LandIncludes all costs related to the purchase of the land including price closing cost survey legal feesoAll costs incurred in preparing it for use is included clearing draining filling gradingoIf the land has a building on it we include demolition and removal less salvaged materialsOnce it is prepared recurring costs such as property tax are expenses We do not depreciate land because it has unlimited lifeLand ImprovementsAdding structures to the land parking lots fences lighting These improvements decline over time depreciate and require maintenance and replacement BuildingsAll costs related to the purchaseconstruction of the buildingoIf purchased includes everything to make it ready for use price closing repairs plumbingoIf constructed cost includes price architect fees permits excavationInterest for construction loans are included in cost of asset until ready for useEquipmentIncludes all costs required to get equipment ready for use purchase freight insurance during transit assembly installations testing
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