Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

TIPS ON CHAPTER TOPICS

TIP: Plant assets is a balance sheet classification that is often referred to as fixed assets or property, plant and equipment. Included in this section should be long-lived tangible assets that are currently being used in operations (to generate goods and services for customers). Examples include land, buildings, and equipment.

TIP: In determining the cost of a plant asset, keep in mind the same guideline we used for inventory: the asset's cost includes all costs necessary to get the item to the condition and location for its intended use.

TIP: In determining the cost of a plant asset, keep in mind the cost principle. Cost of an asset is measured by the cash paid or the cash equivalent price paid. Thus, the recorded cost of an asset is determined by the fair market value of the asset(s) or other consideration given or by the fair market value of the asset(s) or other consideration received, whichever is the more objectively determinable. Fair market value refers to cash equivalent value. When cash is given to acquire an asset, it is a relatively simple matter to determine the asset's cost. However, when a noncash asset is given in exchange, more thought is required to determine the newly acquired asset's cost.

TIP: The cost of tearing down an old building should be charged (debited) to the Land account if the building was someone else's old building and was acquired along with a parcel of land in a case where the land was intended to be used as a site for ...