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