Understanding Assets, Depreciation, and Cost Allocation in

School: University of Maryland, Eastern Shore - Course: ACCT 202 - Subject: Accounting

ACCT 202 ASSETS & DEPRECIATION CHAPTER 10

FIXED ASSETS • FIXED ASSETS = ARE TANGIBLE ASSETS USED IN THE COMPANY'S OPERATIONS THAT HAVE A USEFUL LIFE OF MORE THAN ONE ACCOUNTING PERIOD. • ALSO CALLED PLANT AND EQUIPMENT; PROPERTY, PLANT AND EQUIPMENT.

FIXED ASSETS • USED IN THE OPERATIONS OF THE COMPANY, NOT ACQUIRED FOR RESALE (INVENTORY). • AND HAS A USEFUL LIFE LONGER THAN ONE YEAR.

FIXED ASSETS THE COST OF MACHINERY AND EQUIPMENT INCLUDES: • PURCHASE PRICE • SALES TAX • TRANSPORTATION CHARGES • INSTALLING, ASSEMBLING AND TESTING

FIXED ASSETS THE COST OF BUILDINGS INCLUDE: • TITLE AND FEES • TRANSFER TAXES • ATTORNEY FEES • OTHER EXPENSES NECESSARY TO PREPARE THE BUILDING FOR ITS INTENDED USE IF CONSTRUCTED THE COST INCLUDED: • ALL MATERIAL AND LABOR COSTS • DESIGN FEES, BUILDING PERMITS AND INSURANCE DURING CONSTRUCTION • OVERHEAD, SUCH AS DEPRECIATION ON THE EQUIPMENT USED IN CONSTRUCTION

FIXED ASSETS THE COST OF LAND INCLUDES: • TITLE INSURANCE FEES • LEGAL FEES • SURVEYING, CLEARING AND GRADING • IF AN EXISTING STRUCTURE ON THE LAND IS DEMOLISHED THAT COST IS ALSO INCLUDED IN THE LAND • DOES NOTINCLUDE LAND IMPROVEMENTS

FIXED ASSETS LAND IMPROVEMENTS INCLUDE: • PARKING LOT SURFACES • DRIVEWAYS • SIDEWALKS • FENCES • LANDSCAPING • LIGHTING SYSTEMS • SPRINKLER SYSTEMS

FIXED ASSETS • LUMP-SUM PURCHASE: • THE COMPANY ACQUIRED A BUILDING AND LAND FOR $90,000, INCLUDING SETTLEMENT COSTS. THE APPRAISED VALUE OF THE BUILDING WAS $60,000 AND THE LAND WAS $40,000. • HOW DO YOU DETERMINE THE COST ALLOCATED TO THE BUILDING AND LAND?