Plant Assets, Natural Resources, and Intangibles
1. A plant asset is tangible; it is used in the production or sale of other assets or services; and it has a useful life longer than one accounting period.
2. The cost of a plant asset includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use.
3. Land is an asset with an unlimited life and, therefore, is not subject to depreciation. Land improvements have limited lives and are subject to depreciation.
4. Often the lump-sum or basket purchase includes assets with different lives that must be depreciated separately. Sometimes the purchase may include land, which is never depreciated.
5. …show more content…
Quick Study 10-3 (10 minutes)
($32,500 - $2,500) / 4 years = $7,500 depreciation per year
Quick Study 10-4 (10 minutes)
($32,500 - $2,500) / 200 concerts = $ 150 depreciation per concert x 47 concerts in 2009 $7,050 depreciation in 2009
Quick Study 10-5 (10 minutes)
|$32,500 |Cost |
|- 7,500 |Accumulated depreciation (first year) |
|25,000 |Book value at point of revision |
|- 2,500 |Salvage value |
|22,500 |Remaining depreciable cost |
| ÷ 2 |Years of life remaining |
|$11,250 |Depreciation per year for years 2 and 3 |
Quick Study 10-6 (10 minutes)
Note: Double-declining-balance rate = (100% / 8 years) x 2 = 25%