One characteristic that distinguishes a plant asset from other assets is that it is used in operations for longer than one accounting period. Costs that are normal and reasonable for making a plant asset operational, such as purchase price, shipping, and taxes, should be included in the asset's total cost. Land is the earth's surface, while land improvements have finite lifespans and refer to additions made to the land, like an apartment complex built on an empty property.

1. 1. What characteristics of a plant asset make it different from other assets?
One characteristic separating a plant asset from other assets is that it's used in operations. For
example, a retailer's shelves would be a plant asset, while the merchandise on the shelves
would be another type of asset called inventory. Another characteristic is that plant assets have
a useful life extending over one accounting period. So, the retailer's shelves should last many
years, unlike its pens used to mark receipts and coupons which will only be used for a short
period of time.
2. What is the general rule for cost inclusion for plant assets?
Generally speaking, any cost that is normal and reasonable to get a plant asset operational
should be included in the cost for the plant asset itself. For example, an owner of an accounting
firm wants to buy brand new computers. To start, they will need the amount being charged by
the merchant for the computers themselves. Then, they need the computers shipped to their
location, which will more than likely include a shipping fee. And of course, the state where the
accounting firm is located in will want it to pay a sales tax if one is in place. All of these various
costs need to be included in the final cost for the computers.
3. What is different between land and land improvements?
Land is the earth's surface that, in a human timescale, has an infinite lifespan. In contrast, land
improvements are additions to the land that have finite lifespans. Suppose that a real estate
company purchases an empty property at 16th and Moore Streets in South Philadelphia. That
empty property by itself would be classified as land. Now, the company constructs an
apartment complex on the property. That complex would be classified as a land improvement.
10. What is the process of allocating the cost of natural resources to expense as they are
used?
Depletion is the process of allocating the cost of natural resources to expense as they are used.
The first step is to find the depletion per unit. To do this, you subtract the salvage value from
the cost of the natural resources. Then, you divide the difference by the total units of capacity
to get the depletion per unit. The second step is to find the depletion expense. To do this, you
multiply depletion per unit by the units extracted and sold in the accounting period.
14. When do we know that a company has goodwill? When can goodwill appear in a
company's balance sheet?
We know when a company has goodwill when the company's value exceeds that of its assets
and liabilities. It's not recorded unless an entire company or business segment is purchased.
When this occurs, the difference between the acquired company's net assets and the cost of
acquiring the company is recorded as goodwill in the assets section of the balance sheet.