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Chapter 8

COB 241 Chapter Notes - Chapter 8: Title Search, Sales Tax, Historical Cost

College of Business
Course Code
COB 241
James Irving

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Ch. 8: Accounting for Long Term Operational Assets
Current assets used relatively quickly (inventory/ office supplies) used within a single accounting
Long term operational assets used for extended periods of time (equipment or buildings) two or
more accounting periods
Tangible long term assets:
Property, plant, and equipment
o Recognized by depreciation
Natural resources
o Recognized by depletion
Amortization: the term used when recognizing expense for intangible assets with identifiable useful
Historical cost concept: requires that an asset be recorded at the amount paid for it
1. Purchase price
2. Sales tax
3. Title search and transfer document costs
4. Realtor’s and attore’s fees
5. Remodeling costs
1. Purchase price
2. Sales tax
3. Title search & transfer document costs
4. Realtor’s ad attore’s fees
5. Costs for removal of old buildings
6. Grading costs
1. Purchase price (less discounts)
2. Sales taxes
3. Delivery costs
4. Installation costs
5. Costs to adapt for intended use
Depreciation expense: the amount of a asset’s cost that is allocated to epese durig a accoutig
Salvage value: the expected market value of a fully depreciated asset
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