Describe property, plant, and equipment

Identify the costs to include in initial of property, plant, and equipment: Cost of land

Identify the costs to include in initial of property, plant, and equipment: Cost of Buildings

Identify the costs to include in initial of property, plant, and equipment: Cost of 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: Cash Discounts

Describe the accounting treatment for the disposal of property, plant, and equipment

Understand accounting issues related to acquiring and valuing plant assets: Deferred-payment contracts

Understand accounting issues related to acquiring and valuing plant assets: Lump-sum purchase

Understand accounting issues related to acquiring and valuing plant assets: Issuance of stock

Understand accounting issues related to acquiring and valuing plant assets: Exchanges of nonmonetary assets

Understand accounting issues related to acquiring and valuing plant assets: Contributions

Major characteristics of PPE : They are acquired for use in operations and not for resale

Major Characteristics of PPE: They are long-term in nature and usually depreciated

Major Characteristics of PPE: They possess physical substance

Historical cost: def

historical cost: Ex

Should not write up PPE to reflect fair value when it is above cost, because

Cost of land

Removal of Old Buildings

reductions in the price of land

back taxes and linens (cost of land)

special assessments

land held for resale

Costs of building

Cost of Equipment

Self-constructed asset

Self-constructed direct/indirect

Indirect costs:
Assign no fixed overhead to the cost of the constructed asset

Indirect costs:
Assign a portion of all overhead to the construction process

a pro rata portion

allocated overhead results in excess construction costs

Interest costs during construction:
Capitalize no interest charges during construction

Interest costs during construction:
Charge construction with all costs of funds employed, whether identifiable or not

Interest costs during construction:
Capitalize only the actual interest costs incurred during construction

GAAP- capitalize only the actual interest costs incurred during construction

Qualifying assets

not qualify for interest capitalization

capitalization period

avoidable interest

amount to capitalize

potential amount of interest that it may capitalize

Weighted-average accumulated expenditures

Interest Rate principles

Weighted average interest rate

Expenditures for land for particular use

Expenditures for land for a structure

expenditures for land for lot sale

Interest revenue

Valuation of PPE

long-term credit

Lump-sum price

Issuance of stock

exchange of nonmonetary assets

commercial substance

Type: Commercial Substance

Type: Lacks Commercial substance--no cash received

Type: Lacks Commercial substance---cash received

exchange lacks commercial substance

Exchanges: Loss Situation

Loss Situation JE

loss on disposal of machine

Exchanges: Gain Situation with Commercial substance

Gain Situation with commercial substance JE

Gain on disposal of truck

Exchanges: Gain Situation lacks commercial substance no cash

Gain Situation lacks commercial substance no cash JE

Gain Situation computations

Exchanges: Gain Situation lacks commercial substance some cash

Gain Situation lacks commercial substance some cash JE

Recognized Gain equation

Total gain on exchange-calculation

rationale of partial gain

Contribution

nonreciprocal transfers

assets as donations

FASB position on contributions

Promise immediately? unconditional

Promise immediately? conditional

prudent cost

Costs subsequent to acquisition

costs subsequent to acquisition: conditions

additions

improvements and replacements

rearrangement and re-installation

repairs

difference between improvements and replacements

Substitution Approach

capitalize the new cost

charge to accumulated depreciation

if the expenditure increase the future service potential of the asset...

rearrangement and re-installation costs

ordinary repairs

major repair

Disposition of PPE

Sale of plant assets