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of the VLN, acquisition cost would NOT include: A. Purchase price. B. Transportation cost to get the asset ready to be used. C. Sales taxes. D. Cost incurred to operate the asset

of the VLN, acquisition cost would NOT include: A. Purchase price. B. Transportation cost to get the asset ready to be used. C. Sales taxes. D. Cost incurred to operate the asset

Cornerstones of Financial Accounting
Cornerstones of Financial Accounting
4th Edition
ISBN:9781337690881
Author:Jay Rich, Jeff Jones
Publisher:Jay Rich, Jeff Jones
Chapter7: Operating Assets
Section: Chapter Questions
Problem 29BE
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From page 7-1 of the VLN, acquisition cost would NOT include: A. Purchase price. B. Transportation cost to get the asset ready to be used. C. Sales taxes. D. Cost incurred to operate the asset.
Chapter 7 Video Lecture Outline Long Term Assets CLASSIFICATION OF OPERATING ASSETS -non-current assets -being used in the business PART A: Acquisitions Capitalize – an expenditure that is classified as an asset TANGIBLE ASSETS PROPERTY, PLANT, AND EQUIPMENT (PPE) -Property (Land) the company is using in operations -Plant (Buildings)-offices, stores, storage, ma ing plants, etc. -Equipment--machinery, computers, copiers, vehicles, furniture, fixtures, etc. Land Improvements -includes: parking lots, sidewalks, fences, landscaping, etc., and should be kept separate from the land account Basket Purchase (purchasing land, building and/or equipment in a single purchase) Acquisition Costs -Costs to buy-cash equivalent price, including taxes and other fees -Setup costs (transportation costs, installation costs) -Costs to place the asset in service (to make usable) -reduce acquisition cost by any salvage value received from items sold from the asset prior to getting the asset ready to use. -Does NOT include interest Self Constructed Assets -only time interest is included in the acquisition cost (it is called Capitalized Interest) -once asset is completed, interest is no longer capitalized -Capitalized interest satisfies the Matching Principle
Transcribed Image Text:Chapter 7 Video Lecture Outline Long Term Assets CLASSIFICATION OF OPERATING ASSETS -non-current assets -being used in the business PART A: Acquisitions Capitalize – an expenditure that is classified as an asset TANGIBLE ASSETS PROPERTY, PLANT, AND EQUIPMENT (PPE) -Property (Land) the company is using in operations -Plant (Buildings)-offices, stores, storage, ma ing plants, etc. -Equipment--machinery, computers, copiers, vehicles, furniture, fixtures, etc. Land Improvements -includes: parking lots, sidewalks, fences, landscaping, etc., and should be kept separate from the land account Basket Purchase (purchasing land, building and/or equipment in a single purchase) Acquisition Costs -Costs to buy-cash equivalent price, including taxes and other fees -Setup costs (transportation costs, installation costs) -Costs to place the asset in service (to make usable) -reduce acquisition cost by any salvage value received from items sold from the asset prior to getting the asset ready to use. -Does NOT include interest Self Constructed Assets -only time interest is included in the acquisition cost (it is called Capitalized Interest) -once asset is completed, interest is no longer capitalized -Capitalized interest satisfies the Matching Principle
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