Ch 9 Acquisition and Disposition of Property, Plant, and Equipment Flashcards
a periodic expense recognized when updating the present value of a balance sheet liability
accretion expense
increase or extension of existing assets
should present no major accounting problems
additions
remediation costs would include cleaning up the groundwater, removing soil contamination, and controlling methane gas migration
these expected mediations are referred to as _____________ and the costs are referred to as asset retirement costs (ARC)
asset retirement obligation (ARO)
the amount of interest cost that a company could theoretically avoid if it had not made expenditures for the asset
avoidable interest
the payment with either cash or credit to purchase long-term physical or fixed assets used in a business’s operations
capital expenditure
the period of time during which a company must capitalize interest
capitalization period
an exchange has ____________ if the future cash flows change as a result of the transaction
commercial substance
often some type of asset (i.e. cash, securities, land, or buildings), services, or use of facilities, but it also could be the forgiveness of a debt
contribution
includes assets used in operations, such as store checkout counters, office furniture, factory machinery, and delivery trucks
equipment
another phrase for property, plant, and equipment
fixed assets
- the acquisition price plus sales tax
- costs incurred bringing the asset to its location, such as freight/shipping costs
- costs incurred getting the asset ready for its intended use, such as installing it or testing it prior to use
historical cost
aka betterment, is the substitution of a better asset for the one currently used i.e. a concrete floor for a wooden floor
improvements (betterments)
sometimes an asset’s service is terminated through an _________ such as fire, flood, theft, or condemnation
involuntary conversion
structural additions with limited lives that are made to land
ex) driveways, parking lots, fencing, lightning, landscaping with a limited life e.g. plants, trees, sprinkler systems, and retaining walls for planting beds
land improvement
a special problem of valuing fixed assets arises when a company purchases a group of assets at a single ______________
lump-sum price
if _______ occurs, several periods will benefit
major repairs
a company may exchange a piece of equipment for a piece of land which is called an exchange of ___________
nonmonetary assets
a company makes __________ to maintain plant assets in operating condition
ordinary repairs
another phrase for property, plant, and equipment
plant assets
assets of durable nature
long-term assets vital to business operations and not easily converted into cash
ex) land, building structures (offices, factories, warehouses), & equipment (machinery, computers, vehicles, furniture, tools)
property, plant, and equipment
an exception to the historical cost principle for assets is the ____________ concept
prudent cost
movement of assets from one location to another
companies incur _______ to benefit future periods i.e. machines to facilitate future production
rearrangement and reinstallation costs
the substitution for a similar asset (a wooden floor for a wooden floor)
replacements
short-term business expenses usually used immediately or within one year
revenue expenditure
salaries and wages of employees are only included in the cost of a _________________ if the employees are directly involved with the construction, such as a plant supervisor overseeing the construction
self-constructed asset
to apply the avoidable interest concept, a company determines the potential amount of interest that it may capitalize during an accounting period by multiplying the interest rate(s) by the ________________ for qualifying assets during the period
weighted-average accumulated expenditures
