In this chapter, the following content will be discussed: Explain the cost principle for computing the cost of plant assets; explain depreciation for partial years and changes in estimates; distinguish between revenue and capital expenditures, and account for them. | Acquisition and Disposition of Property, Plant and Equipment PART II: Corporate Accounting Concepts and Issues Lecture 12 Describe property, plant, and equipment. Identify the costs to include in initial valuation of property, plant, and equipment. Describe the accounting problems associated with self-constructed assets. Describe the accounting problems associated with interest capitalization. Understand accounting issues related to acquiring and valuing plant assets. Describe the accounting treatment for costs subsequent to acquisition. Describe the accounting treatment for the disposal of property, plant, and equipment. Learning Objectives Acquisition Acquisition costs: land, buildings, equipment Self-constructed assets Interest costs Observations Valuation Cost Subsequent to Acquisition Dispositions Cash discounts Deferred contracts Lump-sum purchases Stock issuance Nonmonetary exchanges Contributions Other valuation methods Sale Involuntary conversion Miscellaneous problems . | Acquisition and Disposition of Property, Plant and Equipment PART II: Corporate Accounting Concepts and Issues Lecture 12 Describe property, plant, and equipment. Identify the costs to include in initial valuation of property, plant, and equipment. Describe the accounting problems associated with self-constructed assets. Describe the accounting problems associated with interest capitalization. Understand accounting issues related to acquiring and valuing plant assets. Describe the accounting treatment for costs subsequent to acquisition. Describe the accounting treatment for the disposal of property, plant, and equipment. Learning Objectives Acquisition Acquisition costs: land, buildings, equipment Self-constructed assets Interest costs Observations Valuation Cost Subsequent to Acquisition Dispositions Cash discounts Deferred contracts Lump-sum purchases Stock issuance Nonmonetary exchanges Contributions Other valuation methods Sale Involuntary conversion Miscellaneous problems Additions Improvements and replacements Rearrangement and reinstallation Repairs Summary Acquisition and Disposition of Property, Plant, and Equipment “Used in operations” and not for resale. Long-term in nature and usually depreciated. Possess physical substance. Property, plant, and equipment are assets of a durable nature. Other terms commonly used are plant assets and fixed assets. Property, Plant, and Equipment LO 1 Describe property, plant, and equipment. Includes: Land, Building structures (offices, factories, warehouses), and Equipment (machinery, furniture, tools). Historical cost measures the cash or cash equivalent price of obtaining the asset and bringing it to the location and condition necessary for its intended use. Main reasons for historical cost valuation: Historical cost is reliable. Companies should not anticipate gains and losses but should recognize gains and losses only when the asset is sold. Acquisition of PP&E LO 2 Identify the costs to include in initial valuation
