accounting 5110 Acquisition and Disposition of Property, Plant, and Equipment( graded A+ and verified solutions)

Property, Plant, and Equipment - ANSAssets of a durable nature used in the regular operations of a business. Also called fixed assets and plant assets. Plant Assets - ANSAssets of a durable nature used in the regular operations of a business. Also called property, plant, and equipment and fixed assets. Fixed Assets - ANSAssets of a durable nature used in the regular operations of a business. Also called property, plant, and equipment and plant assets. Major Characteristics of Property, Plant, and Equipment - ANS1. They Are Acquired for Use in Operations and Not for Resale. -- Only assets used in normal business operations are classified as property, plant, and equipment. For example, an idle building is more appropriately classified separately as an investment. Land developers or subdividers classify land as inventory. 2. They Are Long-term in Nature and Usually Depreciated. -- Property, plant, and equipment yield services over a number of years. Companies allocate the cost of the investment in these assets to future periods through periodic depreciation charges. The exception is land, which is depreciated only if a material decrease in value occurs, such as a loss in fertility of agricultural land because of poor crop rotation, drought, or soil erosion. 3. They Possess Physical Substance. Property, plant, and equipment are tangible assets characterized by physical existence or substance. -- This differentiates them from intangible assets, such as patents or goodwill. Unlike raw material, however, property, plant, and equipment do not physically become part of a product held for resale. Historical Cost - ANSThe cash or cash equivalent price of obtaining an asset and bringing it to the location and condition necessary for its intended use. Most companies use historical cost as the basis for valuing property, plant, and equipment. Historical cost typically includes the purchase price, freight costs, sales taxes, installation costs, and any related costs incurred after the asset's acquisition (such as additions or improvements) if they provide future service potential. Historical cost is allocated to future periods through depreciation.