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Chapter 8

MGT 11A Chapter Notes - Chapter 8: Title Insurance, European Cooperation In Science And Technology, Carmax


Department
Management
Course Code
MGT 11A
Professor
John Hancock
Chapter
8

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CHAPTER 8: REPORTING AND ANALYZING LONG-TERM ASSETS
SECTION 1: PLANT ASSETS
Set apart from other assets by 2 important features
1) plant assets are used in operations
Ex: land held for expansion, which is reported as a long-term
investment. Instead, if this land holds a factory used in operations,
the land is a plant asset
2) plant assets have useful lives extending over more than one accounting
period
COST DETERMINATION
Plant assets are recorded at cost when acquired
includes expenditures necessary to get an asset in place and ready
for use
To be recorded as part of cost of a plant asset, an expenditure must be
normal, reasonable, and necessary in preparing it for its intended use
If an asset is damaged during unpacking, the repairs are not added
to its cost
Instead, are charged to an expense account
Costs to modify or customize a new plant asset are added to the
asset’s cost
Buildings
Building account consists of purchasing costs or constructing a building
that is used in operations
buildings cost include purchase price, brokerage fees, taxes, title
fees, and attorney fees
Also includes all expenditures to ready it for its intended use,
including any necessary repairs or renovations
Costs such as insurance to cover the asset after it is placed in use
are operating expenses
Land Improvements
Land improvements: additions to land and have limited useful lives
Land Improvements #
Cash #
Land
cost includes the total amount paid for the land, including any real estate
commissions, title insurance fees, legal fees, and any accrued property
taxes paid by the purchaser
Payments for surveying, clearing, grading, and draining also are
included in the cost of land
Included bc they permanently add to the land’s value
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