ACTBAS2 Property Plant & Equipment

8/13/2019 ACTBAS2 Property Plant & Equipment

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Accounting Property, Plant and EquipmentFor ACTBAS 2

CLASSIFICATION

1. Land2. Building3. Equipment4. Machinery5. Furniture and Fixtures6. Land Impro ements

NATURE OF PPE

- are tangi!le long"li ed assets o# used in the operations o# the !usiness andnot held #or sale$

EFINITION

Property, plant and equipment are tangi!le assets that%Are held !y an enterprise #or use in the production or supply o# goods or

ser ices& #or rental to others& or #or administrati e purposes& andAre expected to !e used during more than one period$

Carrying amount !"alue# is the amount at 'hich an asset is recogni(ed in the!alance sheet a#ter deducting any accumulated depreciation$

Co$t is the amount o# cash equi alent paid& or the #air alue o# the otherconsideration gi en to acquire an asset at the time o# its acquisition o#construction$

eprecia%le co$t !amount# is the cost o# an asset or other amount su!stituted #orcost less its residual alue$

epreciation is the systematic allocation o# the deprecia!le amount o# an asseto er its use#ul li#e$

Re$idual "alue is the net amount 'hich the enterprise expects to o!tain #or anasset at the end o# its use#ul li#e a#ter deducting the expected cost o# disposal$

U$e&ul li&e is either% The period o# time 'hich an asset is to !e used !y the enterprise

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The num!er o# production or similar units expected to !e o!tained #romthe asset !y the enterprise$

RECO'NITION

))E should !e recogni(ed as an asset 'hen the #ollo'ing conditions are all present%It is pro!a!le that #uture economic !ene#its associated 'ith the asset 'ill#lo' to the enterprise* and

The cost o# the asset can !e measured relia!lyInitially& measure and recogni(e ))E at cost

CO(PONENTS OF COST

1. Cost o# ))E comprises its purchase price& including import duties andnonre#unda!le purchase taxes a#ter deducting trade and cash discounts$

2. Any directly attri!uta!le cost o# !ringing the asset to 'or+ing condition andintended use$

,ote% Cash discount 'hether ta+en or not ta+en is deducted #rom the in oiceprice

#or purposes o# aluing the asset$

Land

1. )urchase price2. Legal #ees and other expenditures #ro esta!lishing clean title3. Cost o# relocation or reconstruction or property !elonging to others in order to

acquire possession4. Bro+er-s commission5. Fees #or registration and trans#er o# title6. Sur eying #ees7. Mortgages& encum!rances and interest on such mortgages assumed !y !uyer8. .elinquent real estate taxes assumed !y !uyer9. /a(ing or remo ing un'anted !uildings& less any sal age alue10. 0rading and le eling11. )ayments to tenants to induce them to acate the premises12. Special assessments #or pa ing a pu!lic street !ordering the land including

side'al+s& se'ers& 'aterlines and streetlights$

)uilding * i& acquired

1. )urchase price2. /ealtor commissions3. Legal #ees and other expenses incurred in connection 'ith the purchase4. /econditioning& reno ation and remodeling costs to put a !uilding in a

condition suita!le #or its intended use$5. Interest& liens and other encum!rances on the !uilding assumed !y the !uyer6. )ayments to tenants to induce them to acate the !uilding

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)uilding * i& con$tructed

1. Architect #ees2. Engineer #ees3. Insurance costs incurred during construction4. Construction costs 1la!or& materials and o erhead5. Exca ation costs6. Interest on money !orro'ed to #inance construction7. 3al+'ays to and around the !uilding8. )ermits #rom go ernment agencies9. Costs o# temporary !uildings used as construction o##ices and tools or

materials shed$

(ac+inery, Equipment, Furniture and Fi ture$

1. )urchase price 1net o# trade and cash discounts2. Freight& handling& storage and other cost related to the acquisition$3. Insurance 'hile in transit4. Installation cost& including site preparation and assem!ling5. Cost o# testing and trial runs #or use6. Modi#ying #or use7. /epairs 1purchase o# used equipment8. /econditioning 1purchase o# used equipment

CAPITAL E-PEN ITURES 4 expenditures that increase the alue o# the ))E$

Increase in the capacity o# the assetExtension o# use#ul li#eImpro ement o# the quality o# outputIncrease in the asset-s e##iciency

RE.ENUE E-PEN ITURES 4 expenditures that are chargea!le to currentoperations 1recorded as an expense $

,ormal repairs and maintenance on ))E

COSTS NOT CAPITALI/E

5$ Interest on de!t incurred to purchase plant assets are not capitali(ed$2$ The cost o# training employees to use plant assets is not capitali(ed$3. Annual property taxes and insurance costs are not capitali(ed$4. Expenditures that result #rom accidents& neglect& intentional a!use& and the#t

are recogni(ed as losses$

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))E that are classi#ied as held #or sale shall not !e depreciated$

))E classi#ied as held #or sale must !e presented separately on the #ace o#the !alance sheet$

PRO3FOR(A ENTRIES

Acqui$ition o&Property

!Note4 T+e account title 5Property6$+ould %e $peci&ied# r7 Cr7

Cash )roperty xxx Cash xxx

:n account )roperty xxx Accounts paya!le xxx

Full payment

Net Method

" 'ithin discount period Accounts paya!le xxx Cash xxx

" !eyond discountperiod

Accounts paya!le xxx

.iscount lost xxx Cash xxx

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Loss on Sale o# )roperty 4 :ther Expense

0ain on Sale o# )roperty "" :ther Income

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Documents

ACTBAS2 Property Plant & Equipment