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Course: Financial Accounting Session: 2
Course: Financial Accounting Session: 2
Session: 2
Instructor: M Faisal
Course: Financial Accounting
Course: Program: BBA/BS(A&F)
Semester: 3rd/2nd
Topic: Ch 9: Plant & Intangible Assets (Cont’d)
Ch 9: Plant & Intangible Assets
1
Session Contents Activities
#
Ø Buildings
Class activity3: Handout’s End of the Chapter
Ø Equipment practice questions - Ex9.2
Ø Allocation of a lump-sum
2
purchase Home assignment:
Land Improvements
Includes improvements to real estate
Such as:
Office furniture
Factory machinery
Delivery trucks
Airplanes
Determining the Cost of Plant Assets –
Some Special Considerations
Equipment
Include all costs incurred in acquiring the equipment and
preparing it for use.
Costs typically NOT included:
Costs typically include: Costs of
Cash purchase price. Motor vehicle licenses
Accident insurance on company
Sales taxes. trucks & cars
Freight charges. Such items are annual
recurring expenditures & do
Insurance during transit paid not benefit future period
Building 300,000
Equipment 400,000
Total $1,000,000
Determining the Cost of Plant Assets –
Some Special Considerations
% of Total
Appraised Calculation
Appraised
Value for %age Value
Land $250,000 $250,000 25%
$1,000,000
400,000 $400,000 40
Equipment $1,000,000
Total $800,000
Determining the Cost of Plant Assets –
Some Special Considerations
% of Total Allocation of
Appraised $800,000
Appraised
Value Value Cost
Land $250,000 25% $200,000
Journal Entry
Land 200,000
Building 240,000
Equipment 320,000
Cash 800,000
Determining the Cost of Plant Assets –
Some Special Considerations
Assets 1 & 2
These assets were purchased as a lump sum for $104,000
cash. The following information was gathered.
Depreciation Book
Initial Cost Value on
to Date on Appraised
Des cription on Seller’s Seller’s
Seller’s Value
Books Book
Book
Machinery $100,000 $50,000 $50,000 $90,000
Office Equipment 60,000 10,000 50,000 30,000
Capital Expenditures
• Any material expenditure that will benefit several
accounting periods
Revenue Expenditures
• Any expenditure that will benefit only the current
accounting period or that is not material in amount.
Class Activity:
Class Activity:
Class Activity:
Construction of Building
A building was constructed on land purchased last year at a cost of $180,000. Construction began on
February 1 and was completed on November 1. The payments to the contractor were as follows: