Accounting PPE

These costs ARE capitalized:

costs that significantly improve the asset/extends its life

A cost is *capitalized* when

it is recorded as part of an asset on the balance sheet

Depreciation has nothing to do with the _____ value, but exists due to the _____ concept.

nothing to do with asset value; exists due to matching concept

What are the 3 accountable events in the life cycle of PPE?

1. account for acquisition of PPE 2. account for the depreciation of buildings/equipment 3. account for the sale/disposal of PPE

Credit: accumulated depreciation

Contra asset account (decreases assets)

Debit: depreciation expense

Expense account; increases expense (decreases net income)

At what amount should PPE be recorded when it is purchased?

PPE should be recorded at its cost (historical cost concept)

Of PPE, two are depreciated, but one is not. What are they?

Yes: buildings, equipment No: land

These costs are NOT capitalized:

repairs, maintenance, insurance

Depreciation

systematic allocation of the cost of a plant asset to *expense* over its life of use

Lump-sum "basket" purchase

when a company purchases more than one asset for one lump-sum amount