Chapter 7 Plant assets Natural Resources and Intangibles 7 1 Measure and account for the cost of plant assets Cost of Land MV of land Total MV MV MV building MV equipment of TMV TMV x Total cost Cost of Land JE Lump sum 3 assets Building MV TMV add all assets TMV x TC Cost of each assets Land Same as above Equipment Same as above Note Payable 7 2 Distinguish a capital expenditure from an immediate expense A capital expense adds to an asset Expenses focuses on immediate action 7 3 Measure and record depreciation on plant assets Straight line method Cost Residual value Useful life in years x Period used Months 12 Depreciation Book Value Cost Residual value Useful life in years x Years used Depreciation years used AD Cost Accumulated depreciation Book Value Double declining balance method 1 Useful life in years x 2 DDB depreciation rate Cost AD BV x DDB rate DDB Depreciation Year 1 AD Cost AD BV Y1 x DDB rate DDB Depreciation Year 2 Accumulated Depreciation Y2 just add both years worth of depreciation Units of Production method Cost RV Useful life in units Depreciation per unit of output Depreciation per unit m x number of units Depreciation expense UOP Revised Straight line Cost RV Useful life in years Straight line depreciation Annual Depreciation SD x Years depreciated AD Cost RV AD Remaining Dep Cost Basis New Useful life Revised Straight Line Depreciation JE JE Land Purchase Costs chargeable Architect fees Building permit Interest cost Total cash payments for building Depreciation Expense Accumulated Depreciation Land Cash Depreciation Expense Accumulated Depreciation Note Payable Cost Cash Chargeable Depreciation expense JE Building Depreciation BS Plant assets Land Building Less Accumulated Depreciation Building net IS Expense 7 4 Analyze the effect of a plant asset disposal Sales Value Book Value gain loss in sale JE 7 5 Apply GAAP for natural resources and intangible assets Natural Resources Depletion Cost estimated total item depletion per Depletion per x extracts in 1st year depletion expense Depletion for 1st year Tons removed Total tons Depletion rate Cost of assets RV x Depletion rate Depletion Goodwill Purchase amount assets liabilities Goodwill Cash Accumulated depreciation Loss on sale Product
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