F3 - PP&E Cost Basis Flashcards

1
Q

Costs of Plant/Buildings:

A
  • Purchase Price
  • All repair charges neglected by previous owner(deferred maintance)
  • Alteration and improvements
  • Architects fees
  • Possible addition of construction period interest
  • digging a hole for the foundation
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2
Q

Costs of Equipment:
expenditures related to acquisiton or construction of equip.

A
  • invoice price (cost)
  • less cash discounts and other
  • Add freight in (and insurance while on transit and while in construction)
  • Add installation charges (including testing and perparation for use)
  • Add sales and federal excise taxes
  • possible additon of consturction period interest
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3
Q

Cost of LAND

A
  • Cost of land
  • cost to raze a building
  • minus crap material sale
  • excabtation cost is NOT INCLUDED
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4
Q

What factor must be present to use the units-of-production (activity) method of depreciation?

A

Total units to be produced can be estimated.

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5
Q
A
  • 2 X 1/N X (Cost - Accumlated Depreciation)
  • no salvage value deducted
  • we keep reducing the cost by the acc dep every year it changes and it goes down till we have the salvage value amount
  • also the 2/N (stays the same every year)
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6
Q
A
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