Chapter 7 – Lecture Notes
P,P and E – commonly used abbreviation, meaning property, plant and
equipment.
Property generally means land.
Plant means factories, office buildings, warehouses, houses etc. depending on the
type of business the company is in.
Equipment – frequently, means equipment in factories or offices.
Long-term assets generally represent a businesses’ productive assets – assets
along with employees produce revenues for companies.
GAAP for LTA generally is cost, and all expenditures incurred to get the asset
ready for its productive use are included in costs.
Therefore, land is recorded at cost, normally FMV. Any cost incurred to level land
( tearing down an existing building when purchased) is added to the cost of the
land account. Less money received from selling the salvage materials.
Land is never depreciated.
Title opinions are paid for by buyers in order to ensure that when they purchase
land that they receive a ‘clean’ title to their property. Meaning that there are no
prior liens (debt, mortgages) encumbering the property.
Land Improvements is, not buildings, but everything else that is permanently
attached to the land that wears-out and is depreciated. Each type of land
improvements has its own account. Land Improvements – sidewalks, Land
Improvements – parking lot. Because land improvements wear-out they are
depreciated.
P,P and E – commonly used abbreviation, meaning property, plant and
equipment.
Property generally means land.
Plant means factories, office buildings, warehouses, houses etc. depending on the
type of business the company is in.
Equipment – frequently, means equipment in factories or offices.
Long-term assets generally represent a businesses’ productive assets – assets
along with employees produce revenues for companies.
GAAP for LTA generally is cost, and all expenditures incurred to get the asset
ready for its productive use are included in costs.
Therefore, land is recorded at cost, normally FMV. Any cost incurred to level land
( tearing down an existing building when purchased) is added to the cost of the
land account. Less money received from selling the salvage materials.
Land is never depreciated.
Title opinions are paid for by buyers in order to ensure that when they purchase
land that they receive a ‘clean’ title to their property. Meaning that there are no
prior liens (debt, mortgages) encumbering the property.
Land Improvements is, not buildings, but everything else that is permanently
attached to the land that wears-out and is depreciated. Each type of land
improvements has its own account. Land Improvements – sidewalks, Land
Improvements – parking lot. Because land improvements wear-out they are
depreciated.
