Chapter 9 Flashcards
What does PP&E stand for?
Property, plant, and equipment
What are the three things that make up PP&E?
- Held for use
- Long-term
- Tangible (can touch it)
What does it mean for an asset to be held for sell?
That the company is going to sell it to customers
What is it called when a company uses an asset for day to day operations?
Held for use
What is capitalized under PP&E?
All cost necessary to get the asset (Plant, property, and equipment) ready for use
What is depreciation of PP&E?
Allocates the cost of the PP&E to future periods (as depreciation expense) in a “systematic and rational” manner.
Three things you must know to calculate depreciation:
- Depreciable cost
- Estimated useful life
- Depreciation method
What is the Accumulated Depreciation account?
A contra asset account
What makes a contra asset account go up and down?
Since it is the opposite of its sistering account it goes up with credits and down with debits.
What is the Straight line method?
The amount that is depreciated is the same every year.
What is the units of production method?
The deprecation based on the actual amount of units being used.
When something needs regular maintenance under PP&E what does that mean?
The cost is expensed immediately.
Under PP&E what do you capitalize and depreciate?
Larger replacements or additions.
What are disposals?
removes a long-term asset
How is the gain or loss calculated on the disposal?
The gain or loss is the selling price less the net book value of the asset.
