Chapter 10 - Plant assets, natural resources, and intangible assets. In this chapter, the learning objectives are: 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. | Plant Assets, Natural Resources, and Intangible Assets 10 Learning Objectives Explain the accounting for plant asset expenditures. Apply depreciation methods to plant assets. Explain how to account for the disposal of plant assets. 3 Describe how to account for natural resources and intangible assets. 2 1 4 Discuss how plant assets, natural resources, and intangible assets are reported and analyzed. 5 Plant assets are resources that have physical substance (a definite size and shape), are used in the 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. Referred to as property, plant, and equipment; plant and equipment; and fixed assets. LO 1 LEARNING OBJECTIVE Explain the accounting for plant asset expenditures. 1 Plant assets are critical to a company’s success Illustration 10-1 Plant Assets LO 1 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 Assets LO 1 All necessary costs incurred in making the land ready for its intended use increase (debit) the Land account. Costs typically include: cash purchase price, closing costs such as title and attorney’s fees, real estate brokers’ commissions, and accrued property taxes and other liens on the land assumed by the purchaser. Determining the Cost of Plant Assets LAND LO 1 Illustration: Hayes Company acquires real estate at a cash cost of $100,000. The property contains an old warehouse that is razed at a net cost of $6,000 ($7,500 in costs less $1,500 proceeds from salvaged materials). Additional expenditures are the attorney’s fee, $1,000, and the real estate broker’s commission, $8,000. Required: Determine the amount to be reported as the cost of the land. Determining the Cost of Plant Assets LO 1 Land Required: Determine amount to be reported as the cost of the land. Cash price of | Plant Assets, Natural Resources, and Intangible Assets 10 Learning Objectives Explain the accounting for plant asset expenditures. Apply depreciation methods to plant assets. Explain how to account for the disposal of plant assets. 3 Describe how to account for natural resources and intangible assets. 2 1 4 Discuss how plant assets, natural resources, and intangible assets are reported and analyzed. 5 Plant assets are resources that have physical substance (a definite size and shape), are used in the 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. Referred to as property, plant, and equipment; plant and equipment; and fixed assets. LO 1 LEARNING OBJECTIVE Explain the accounting for plant asset expenditures. 1 Plant assets are critical to a company’s success Illustration 10-1 Plant Assets LO 1 Historical Cost Principle requires that companies record plant assets at cost. Cost consists of all expenditures
