The document discusses accounting for property, plant, and equipment (PP&E). It defines PP&E as long-term tangible assets used in operations, including land, buildings, machinery, and equipment. Historical cost is the primary basis for valuing PP&E, which measures the cash paid or equivalent price to bring the asset to the location and condition for its intended use. Costs included in the initial valuation of PP&E comprise all expenditures needed to acquire and prepare the asset, such as purchase price, transportation, installation, and construction costs. The document also covers accounting for self-constructed assets and nonmonetary exchanges of PP&E.
Chapter 14:
Describe the nature of bonds and indicate the accounting for bond issuances.
Explain the accounting for long-term notes payable.
Explain the accounting for the extinguishment of non-current liabilities.
Indicate how to present and analyze non-current liabilities.
Non-current liabilities (long-term debt) consist of an expected outflow of resources arising from present obligations that are not payable within a year or the operating cycle of the company, whichever is longer.
Current Liabilities, Provisions, and Contingenciesreskino1
Current Liabilities,
Provisions, and Contingencies
After studying this chapter, you should be able to:
1. Describe the nature, valuation, and reporting of current liabilities.
2. Explain the accounting for different types of provisions.
3. Explain the accounting for loss and gain contingencies.
4. Indicate how to present and analyze liability-related information
Acquisition and Disposition of Property, Plant, and Equipmentreskino1
Identify property, plant, and equipment and its related costs.
Discuss the accounting problems associated with interest capitalization.
Explain accounting issues related to acquiring and valuing plant assets.
Describe the accounting treatment for costs subsequent to acquisition.
Describe the accounting treatment for the disposal of property, plant, and equipment.
Describe depreciation concepts and methods of depreciation.
Identify other depreciation issues.
Explain the accounting issues related to asset impairment.
Discuss the accounting procedures for depletion of mineral resources.
Apply the accounting for revaluations.
Demonstrate how to report and analyze property, plant, equipment, and mineral resources.
Chapter 14:
Describe the nature of bonds and indicate the accounting for bond issuances.
Explain the accounting for long-term notes payable.
Explain the accounting for the extinguishment of non-current liabilities.
Indicate how to present and analyze non-current liabilities.
Non-current liabilities (long-term debt) consist of an expected outflow of resources arising from present obligations that are not payable within a year or the operating cycle of the company, whichever is longer.
Current Liabilities, Provisions, and Contingenciesreskino1
Current Liabilities,
Provisions, and Contingencies
After studying this chapter, you should be able to:
1. Describe the nature, valuation, and reporting of current liabilities.
2. Explain the accounting for different types of provisions.
3. Explain the accounting for loss and gain contingencies.
4. Indicate how to present and analyze liability-related information
Acquisition and Disposition of Property, Plant, and Equipmentreskino1
Identify property, plant, and equipment and its related costs.
Discuss the accounting problems associated with interest capitalization.
Explain accounting issues related to acquiring and valuing plant assets.
Describe the accounting treatment for costs subsequent to acquisition.
Describe the accounting treatment for the disposal of property, plant, and equipment.
Describe depreciation concepts and methods of depreciation.
Identify other depreciation issues.
Explain the accounting issues related to asset impairment.
Discuss the accounting procedures for depletion of mineral resources.
Apply the accounting for revaluations.
Demonstrate how to report and analyze property, plant, equipment, and mineral resources.
Describe and apply the lower-of-cost-or-net realizable value rule.
Identify other inventory valuation issues.
Determine ending inventory by applying the gross profit method.
Determine ending inventory by applying the retail inventory method.
Explain how to report and analyze inventory.
Describe and apply the lower-of-cost-or-net realizable value rule.
Identify other inventory valuation issues.
Determine ending inventory by applying the gross profit method.
Determine ending inventory by applying the retail inventory method.
Explain how to report and analyze inventory.
Hi Everyone,
In this Powerpoint Presentation I have discussed about the Accounting Standard-10 on Property, Plant & Equipment issued by ICAI. I have covered all the major topics such as measurement of PPE, Depreciation(Which was previously covered under AS-6 now deleted), Initial Recognition, Subsequent Recognition etc.
396
Chapter
Plant Assets, Natural
Resources, and
Intangible Assets
After studying this chapter, you should be
able to:
1 Describe how the cost principle applies
to plant assets.
2 Explain the concept of depreciation.
3 Compute periodic depreciation using
different methods.
4 Describe the procedure for revising
periodic depreciation.
5 Distinguish between revenue and
capital expenditures, and explain the
entries for each.
6 Explain how to account for the disposal
of a plant asset.
7 Compute periodic depletion of natural
resources.
8 Explain the basic issues related to
accounting for intangible assets.
9 Indicate how plant assets, natural
resources, and intangible assets are
reported.
S T U D Y O B J E C T I V E S
Feature Story
The Navigator✓
9
HOW MUCH FOR A RIDE TO THE BEACH?
It’s spring break. Your plane has landed, you’ve finally found your bags, and
you’re dying to hit the beach—but first you need a “vehicular unit” to get
Scan Study Objectives ■
Read Feature Story ■
Read Preview ■
Read text and answer
p. 402 ■ p. 409 ■ p. 412 ■ p. 417 ■
Work Comprehensive p. 421 ■
p. 422 ■
Review Summary of Study Objectives ■
Answer Self-Study Questions ■
Complete Assignments ■
The Navigator✓
Do it!
Do it!
JWCL165_c09_396-443.qxd 8/4/09 9:39 PM Page 396
397
you there. As you turn
away from baggage claim
you see a long row of
rental agency booths.
Many are names you are
familiar with—Hertz, Avis,
and Budget. But a booth
at the far end catches your
eye—Rent-A-Wreck
(www.rent-a-wreck.com).
Now there’s a company
making a clear statement!
Any company that relies
on equipment to generate
revenues must make decisions about what kind of equipment to buy, how
long to keep it, and how vigorously to maintain it. Rent-A-Wreck has decided
to rent used rather than new cars and trucks. It rents these vehicles across
the United States, Europe, and Asia. While the big-name agencies push
vehicles with that “new car smell,” Rent-A-Wreck competes on price. The
message is simple: Rent a used car and save some cash. It’s not a message
that appeals to everyone. If you’re a marketing executive wanting to impress
a big client, you probably don’t want to pull up in a Rent-A-Wreck car. But if
you want to get from point A to point B for the minimum cash per mile, then
they are playing your tune. The company’s message seems to be getting
across to the right clientele. Revenues have increased significantly.
When you rent a car from Rent-A-Wreck, you are renting from an independ-
ent business person who has paid a “franchise fee” for the right to use the
Rent-A-Wreck name. In order to gain a franchise, he or she must meet finan-
cial and other criteria, and must agree to run the rental agency according to
rules prescribed by Rent-A-Wreck. Some of these rules require that each fran-
chise maintain its cars in a reasonable fashion. This ensures that, though you
won’t be cruising down Daytona Beach’s Atlantic Avenue in a Mercedes con-
ver.
B-10.01 The following selected account balances were taken from t.docxikirkton
B-10.01 The following selected account balances were taken from the general ledger of Vance Corporation as of December 31, 20X7. Examine this information and prepare the property, plant & equipment section of the company's balance sheet. All accounts listed carry a normal balance.Land$ 500,000Buildings1,650,000Equipment2,860,000Accumulated depreciation: Buildings472,000Accumulated depreciation: Equipment1,333,400Depreciation expense: Buildings125,000Depreciation expense: Equipment278,111
&R&"Myriad Web Pro,Bold"&20B-10.01
B-10.01
Worksheet B-10.01 Property, Plant & Equipment
&L&"Myriad Web Pro,Bold"Name:
Date: Section: &R&"Myriad Web Pro,Bold"&20B-10.01
B-10.01
B-10.02Sonjay Motors recently purchased a new sign to be erected in front of its dealership. The sign company that produced the sign had a standard price for this item at $25,000, but Sonjay was able to negotiate a 20% discount from standard. In addition, the sign company paid $1,200 of freight costs to deliver the sign to Sonjay. Sonjay hired an electrician for $1,300 to wire the new sign's lighting. In addition, Sonjay rented a crane for $800 and paid an installation crew $1,600 to erect the sign. The city required Sonjay to pay a one-time sign inspection fee of $500. Furthermore, Sonjay had to obtain an annual permit at a cost of $50 for the first year. During installation, the crew accidentally damaged an adjoining neighbor's landscaping, and Sonjay paid $750 to clean and repair those problems.Determine the correct cost allocation to the sign, and prepare a journal entry to reflect the total expenditures related to this acquisition.
B-10.02
Worksheet B-10.02The sign cost is computed as follows:GENERAL JOURNAL DateAccountsDebitCredit
B-10.02
B-10.03Evaluate the following costs and decide if each is a "capital expenditure" or not. Then, if a capital expenditure, decide which account the cost should be recorded in: Land, Land Improvement, Building, or Equipment. The first item is done as an example.CapitalCategoryYesNoLandLand ImprovementBuildingEquipmentDelivery cost of new furniture✓✓Wages paid to guard at office buildingFees for title insurance on land purchaseCost of periodic repainting of parking lotCost of building new sidewalksInterest costs on loan to buy equipmentComputer training class on general commercial software packageInterest cost on loan during construction period for new buildingArchitects fees for new buildingInstallation and setup costs on new machineryRepair of damage to device broken during initial installationSafety violation fines at construction siteTap fees for connecting new building to city water system
B-10.03
Worksheet B-10.03CapitalCategoryYesNoLandLand ImprovementBuildingEquipmentDelivery cost of new furniture✓✓Wages paid to guard at office buildingFees for title insurance on land purchaseCost of periodic repainting of parking lotCost of building new sidewalksInterest costs on loan to buy equipmentComputer trai ...
After studying this chapter, you should be able to:
1. Discuss the characteristics, valuation, and amortization of intangible assets.
2. Describe the accounting for various types of intangible assets.
3. Explain the accounting issues for recording goodwill.
4. Identify impairment procedures and presentation requirements for intangible assets.
5. Describe the accounting and presentation for research and development and similar costs.
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Business Valuation Principles for EntrepreneursBen Wann
This insightful presentation is designed to equip entrepreneurs with the essential knowledge and tools needed to accurately value their businesses. Understanding business valuation is crucial for making informed decisions, whether you're seeking investment, planning to sell, or simply want to gauge your company's worth.
What are the main advantages of using HR recruiter services.pdfHumanResourceDimensi1
HR recruiter services offer top talents to companies according to their specific needs. They handle all recruitment tasks from job posting to onboarding and help companies concentrate on their business growth. With their expertise and years of experience, they streamline the hiring process and save time and resources for the company.
Attending a job Interview for B1 and B2 Englsih learnersErika906060
It is a sample of an interview for a business english class for pre-intermediate and intermediate english students with emphasis on the speking ability.
RMD24 | Debunking the non-endemic revenue myth Marvin Vacquier Droop | First ...BBPMedia1
Marvin neemt je in deze presentatie mee in de voordelen van non-endemic advertising op retail media netwerken. Hij brengt ook de uitdagingen in beeld die de markt op dit moment heeft op het gebied van retail media voor niet-leveranciers.
Retail media wordt gezien als het nieuwe advertising-medium en ook mediabureaus richten massaal retail media-afdelingen op. Merken die niet in de betreffende winkel liggen staan ook nog niet in de rij om op de retail media netwerken te adverteren. Marvin belicht de uitdagingen die er zijn om echt aansluiting te vinden op die markt van non-endemic advertising.
Cracking the Workplace Discipline Code Main.pptxWorkforce Group
Cultivating and maintaining discipline within teams is a critical differentiator for successful organisations.
Forward-thinking leaders and business managers understand the impact that discipline has on organisational success. A disciplined workforce operates with clarity, focus, and a shared understanding of expectations, ultimately driving better results, optimising productivity, and facilitating seamless collaboration.
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In this deck, you will learn the significance of workplace discipline for organisational success. You’ll also learn
• Four (4) workplace discipline methods you should consider
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Implicitly or explicitly all competing businesses employ a strategy to select a mix
of marketing resources. Formulating such competitive strategies fundamentally
involves recognizing relationships between elements of the marketing mix (e.g.,
price and product quality), as well as assessing competitive and market conditions
(i.e., industry structure in the language of economics).
What is the TDS Return Filing Due Date for FY 2024-25.pdfseoforlegalpillers
It is crucial for the taxpayers to understand about the TDS Return Filing Due Date, so that they can fulfill your TDS obligations efficiently. Taxpayers can avoid penalties by sticking to the deadlines and by accurate filing of TDS. Timely filing of TDS will make sure about the availability of tax credits. You can also seek the professional guidance of experts like Legal Pillers for timely filing of the TDS Return.
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Tata Group Dials Taiwan for Its Chipmaking Ambition in Gujarat’s DholeraAvirahi City Dholera
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2. 10-2
► “Used in operations” and not for
resale.
► Long-term in nature and usually
depreciated.
► Possess physical substance.
Property, plant, and equipment are assets of a durable
nature. Other terms commonly used are plant assets and
fixed assets.
Property, Plant, and Equipment
LO 1 Describe property, plant, and equipment.
Includes:
Land,
Building structures
(offices, factories,
warehouses), and
Equipment
(machinery, furniture,
tools).
3. 10-3
Historical cost measures the cash or cash equivalent price
of obtaining the asset and bringing it to the location and
condition necessary for its intended use.
Main reasons for historical cost valuation:
Historical cost is reliable.
Companies should not anticipate gains and losses but
should recognize gains and losses only when the asset
is sold.
Acquisition of PP&E
LO 2 Identify the costs to include in initial valuation of
property, plant, and equipment.
4. 10-4
Includes all costs to acquire land and ready it for use. Costs
typically include:
Cost of Land
Acquisition of PP&E
LO 2
(1) purchase price;
(2) closing costs, such as title to the land, attorney’s fees, and
recording fees;
(3) costs of grading, filling, draining, and clearing;
(4) assumption of any liens, mortgages, or encumbrances on
the property; and
(5) additional land improvements that have an indefinite life.
5. 10-5
Improvements with limited lives, such as private
driveways, walks, fences, and parking lots, are recorded as
Land Improvements and depreciated.
Land acquired and held for speculation is classified
as an investment.
Land held by a real estate concern for resale should
be classified as inventory.
Acquisition of PP&E
LO 2 Identify the costs to include in initial valuation of
property, plant, and equipment.
Cost of Land
6. 10-6
Includes all costs related directly to acquisition or
construction. Cost typically include:
materials, labor, and overhead costs incurred during
construction and
professional fees and building permits.
Cost of Buildings
LO 2 Identify the costs to include in initial valuation of
property, plant, and equipment.
Acquisition of PP&E
7. 10-7 LO 2
Acquisition of PP&E
Cost of Equipment
Include all costs incurred in acquiring the equipment and
preparing it for use. Costs typically include:
1) purchase price,
2) freight and handling charges,
3) insurance on the equipment while in transit,
4) cost of special foundations if required,
5) assembling and installation costs, and
6) costs of conducting trial runs.
8. 10-8
Acquisition of PP&E
(a) Money borrowed to pay building contractor
(b) Payment for construction from note proceeds
(c) Cost of land fill and clearing
(d) Delinquent real estate taxes on property
assumed
(e) Premium on 6-month insurance policy during
construction
(f) Refund of 1-month insurance premium because
construction completed early
LO 2
E10-1 (variation): The expenditures and receipts below are related to
land, land improvements, and buildings acquired for use in a business
enterprise. Determine how the following should be classified:
Notes Payable
Building
Land
Land
Building
(Building)
9. 10-9
Acquisition of PP&E
(g) Architect’s fee on building
(h) Cost of real estate purchased as a plant site
(land $200,000 and building $50,000)
(i) Commission fee paid to real estate agency
(j) Installation of fences around property
(k) Cost of razing and removing building
(l) Proceeds from salvage of demolished building
(m) Cost of parking lots and driveways
(n) Cost of trees and shrubbery (permanent)
Building
LO 2
Land
Land
Land Improvements
Land
(Land)
Land Improvements
Land
E10-1 (variation): The expenditures and receipts below are related to
land, land improvements, and buildings acquired for use in a business
enterprise. Determine how the following should be classified:
10. 10-10
Self-Constructed Assets
Acquisition of PP&E
Costs typically include:
(1) Materials and direct labor
(2) Overhead can be handled in two ways:
1. Assign no fixed overhead
2. Assign a portion of all overhead to the construction
process.
Companies use the second method extensively.
LO 3 Describe the accounting problems associated with self-constructed assets.
11. 10-11
Valuation of PP&E
LO 5 Understand accounting issues related to acquiring and valuing plant assets.
Ordinarily accounted for on the basis of:
the fair value of the asset given up or
the fair value of the asset received,
whichever is clearly more evident.
Exchanges of Nonmonetary Assets
Companies should recognize immediately any gains or losses
on the exchange when the transaction has commercial
substance.
12. 10-12
Valuation of PP&E
LO 5 Understand accounting issues related to acquiring and valuing plant assets.
Meaning of Commercial Substance
Exchange has commercial substance if the future cash flows
change as a result of the transaction. That is, if the two parties’
economic positions change, the transaction has commercial
substance.
Illustration 10-10
* If cash is 25%
or more of the
fair value of the
exchange,
recognize entire
gain because
earnings
process is
complete.
13. 10-13
Valuation of PP&E
LO 5 Understand accounting issues related to acquiring and valuing plant assets.
Companies recognize a loss immediately whether the exchange
has commercial substance or not.
Rationale: Companies should not value assets at more than their
cash equivalent price; if the loss were deferred, assets would be
overstated.
Exchanges - Loss Situation
14. 10-14
Valuation of PP&E
LO 5 Understand accounting issues related to acquiring and valuing plant assets.
Illustration: Information Processing, Inc. trades its used machine for a
new model at Jerrod Business Solutions Inc. The exchange has
commercial substance. The used machine has a book value of $8,000
(original cost $12,000 less $4,000 accumulated depreciation) and a fair
value of $6,000. The new model lists for $16,000. Jerrod gives
Information Processing a trade-in allowance of $9,000 for the used
machine. Information Processing computes the cost of the new asset
as follows.
Illustration 10-11
15. 10-15
Equipment 13,000
Accumulated Depreciation—Equipment 4,000
Loss on Disposal of Equipment 2,000
Equipment 12,000
Cash 7,000
Valuation of PP&E
LO 5 Understand accounting issues related to acquiring and valuing plant assets.
Illustration: Information Processing records this transaction as
follows:
Illustration 10-12
Loss on
Disposal
16. 10-16
Valuation of PP&E
LO 5 Understand accounting issues related to acquiring and valuing plant assets.
Exchanges - Gain Situation
Has Commercial Substance. Company usually records the
cost of a nonmonetary asset acquired in exchange for
another nonmonetary asset at the fair value of the asset
given up, and immediately recognizes a gain.
17. 10-17
Valuation of PP&E
LO 5 Understand accounting issues related to acquiring and valuing plant assets.
Illustration: Interstate Transportation Company exchanged a number
of used trucks plus cash for a semi-truck. The used trucks have a
combined book value of $42,000 (cost $64,000 less $22,000
accumulated depreciation). Interstate’s purchasing agent,
experienced in the second-hand market, indicates that the used trucks
have a fair market value of $49,000. In addition to the trucks,
Interstate must pay $11,000 cash for the semi-truck. Interstate
computes the cost of the semi-truck as follows.
Illustration 10-13
18. 10-18
Semi-truck 60,000
Accumulated Depreciation—Trucks 22,000
Trucks (used) 64,000
Gain on disposal of Used Trucks 7,000
Cash 11,000
Valuation of PP&E
LO 5 Understand accounting issues related to acquiring and valuing plant assets.
Illustration: Interstate records the exchange transaction as follows:
Illustration 10-14
Gain on
Disposal
19. 10-19
Valuation of PP&E
LO 5 Understand accounting issues related to acquiring and valuing plant assets.
Exchanges - Gain Situation
Lacks Commercial Substance—No Cash Received. Now
assume that Interstate Transportation Company exchange
lacks commercial substance. That is, the economic position
of Interstate did not change significantly as a result of this
exchange. In this case, Interstate defers the gain of $7,000
and reduces the basis of the semi-truck.
20. 10-20
Trucks (semi) 53,000
Accumulated Depreciation—Trucks 22,000
Trucks (used) 64,000
Cash 11,000
Valuation of PP&E
LO 5 Understand accounting issues related to acquiring and valuing plant assets.
Illustration: Interstate records the exchange transaction as
follows:
Illustration 10-15
21. 10-21
Valuation of PP&E
LO 5 Understand accounting issues related to acquiring and valuing plant assets.
Exchanges - Gain Situation
Lacks Commercial Substance—Some Cash Received.
When a company receives cash (sometimes referred to as
“boot”) in an exchange that lacks commercial substance, it
may immediately recognize a portion of the gain. The
general formula for gain recognition when an exchange
includes some cash is as follows:
Illustration 10-16
22. 10-22
Valuation of PP&E
LO 5 Understand accounting issues related to acquiring and valuing plant assets.
Illustration: Queenan Corporation traded in used machinery
with a book value of $60,000 (cost $110,000 less accumulated
depreciation $50,000) and a fair value of $100,000. It receives in
exchange a machine with a fair value of $90,000 plus cash of
$10,000.
Illustration 10-17
23. 10-23
Valuation of PP&E
LO 5 Understand accounting issues related to acquiring and valuing plant assets.
Illustration 10-18
The portion of the gain a company recognizes is the ratio of
monetary assets (cash in this case) to the total consideration
received.
24. 10-24
Valuation of PP&E
LO 5 Understand accounting issues related to acquiring and valuing plant assets.
Queenan would record the following entry.
Illustration 10-19
Cash 10,000
Machine 54,000
Accumulated Depreciation—Machine 50,000
Machine 110,000
Gain on disposal of machine 4,000
25. 10-25
Valuation of PP&E
LO 5 Understand accounting issues related to acquiring and valuing plant assets.
Summary of Gain and Loss Recognition
on Exchanges of Non-Monetary Assets
Illustration 10-20
26. 10-26
E10-19: Santana Company exchanged equipment used in its
manufacturing operations plus $2,000 in cash for similar equipment
used in the operations of Delaware Company. The following
information pertains to the exchange.
LO 5 Understand accounting issues related to acquiring and valuing plant assets.
Santana Delaware
Equipment (cost) $28,000 $28,000
Accumulated Depreciation 19,000 10,000
Fair value of equipment 13,500 15,500
Cash given up 2,000
Instructions: Prepare the journal entries to record the exchange on
the books of both companies.
Valuation of PP&E
27. 10-27
Calculation of Gain or Loss
LO 5 Understand accounting issues related to acquiring and valuing plant assets.
Santana Delaware
Fair value of equipment received $15,500 $13,500
Cash received / paid (2,000) 2,000
Less: Book value of equipment
($28,000-19,000) (9,000)
($28,000-10,000) (18,000)
Gain or (Loss) on Exchange $4,500 ($2,500)
Valuation of PP&E
28. 10-28
Has Commercial Substance
LO 5 Understand accounting issues related to acquiring and valuing plant assets.
Santana:
Equipment 15,500
Accumulated depreciation 19,000
Cash 2,000
Equipment 28,000
Gain on exchange 4,500
Delaware:
Cash 2,000
Equipment 13,500
Accumulated depreciation 10,000
Loss on exchange 2,500
Equipment 28,000
Valuation of PP&E
29. 10-29 LO 5 Understand accounting issues related to acquiring and valuing plant assets.
Santana (Has Commercial Substance):
Equipment 15,500
Accumulated depreciation 19,000
Cash 2,000
Equipment 28,000
Gain on disposal of equipment 4,500
Valuation of PP&E
Santana (LACKS Commercial Substance):
Equipment (15,500 – 4,500) 11,000
Accumulated depreciation 19,000
Cash 2,000
Equipment 28,000
30. 10-30 LO 5 Understand accounting issues related to acquiring and valuing plant assets.
Delaware (Has Commercial Substance):
Valuation of PP&E
Delaware (LACKS Commercial Substance):
Cash 2,000
Equipment 13,500
Accumulated depreciation 10,000
Loss on disposal of equipment 2,500
Equipment 28,000
Cash 2,000
Equipment 13,500
Accumulated depreciation 10,000
Loss on disposal of equipment 2,500
Equipment 28,000
31. 10-31
Disposition of PP&E
LO 7 Describe the accounting treatment for the
disposal of property, plant, and equipment.
A company may retire plant assets voluntarily or dispose of
them by
Sale.
involuntary conversion.
Depreciation must be taken up to the date of disposition.
32. 10-32
Disposition of PP&E
BE10-14: Ottawa Corporation owns machinery that cost $20,000
when purchased on July 1, 2009. Depreciation has been recorded
at a rate of $2,400 per year, resulting in a balance in accumulated
depreciation of $8,400 at December 31, 2012. The machinery is
sold on September 1, 2013, for $10,500.
Prepare journal entries to
a) update depreciation for 2013 and
b) record the sale.
LO 7 Describe the accounting treatment for the
disposal of property, plant, and equipment.
Sale of Plant Assets
33. 10-33
a) Depreciation for 2013
Depreciation expense ($2,400 x 8/12) 1,600
Accumulated depreciation 1,600
b) Record the sale
Cash 10,500
Accumulated depreciation 10,000
Machinery 20,000
Gain on sale 500
Disposition of PP&E
* $8,400 + $1,600 = $10,000
*
LO 7 Describe the accounting treatment for the
disposal of property, plant, and equipment.
34. 10-34
Sometimes an asset’s service is terminated through some type
of involuntary conversion such as fire, flood, theft, or
condemnation.
Companies report the difference between the amount
recovered (e.g., from a condemnation award or insurance
recovery), if any, and the asset’s book value as a gain or loss.
They treat these gains or losses like any other type of
disposition.
Involuntary Conversion
Disposition of PP&E
LO 7 Describe the accounting treatment for the
disposal of property, plant, and equipment.