Unit 10 Plant and Equipment
Learning Objectives
After studying this unit, you should be able to:
1. Describe the term plant and equipment.
2. Specify the categories of plant assets. 3. Explain the determination of the cost of plant and equipment. 4. State the treatments of related costs incurred after the acquisition of plant and equipment. 5. Define the term depreciation. 6. Describe the methods of computing depreciation.
10-2-2 Determining the Cost of Plant and Equipment
Assets Acquired by Exchange
The cost amount of the new asset is the money amount of the ces given up to acquier it.
7. Explain the disposal of plant and equipment.
Key Terms
plant and equipment (固定资产)
method trade in (以旧换新) betterments (改造投资)
additions (扩建)
straight-line method (直线折旧法) unit-of-output method (工作量法)
Only reasonable and necessary expenditures should be included.
Assets purchased for Cash
The cost of the asset is then equal to the cash outlay necessary in acquiring the asset plus any expenditures for freight, insurance while in transit, installation, trial runs and any other costs necessary to make the asset ready for use.
The cost of plant and equipment includes all expenditures reasonable and necessary in acquiring the asset and placing it in a position and conditionfor use in the operations of the business .
double-declining-balance method (双倍余额递减法)
disposal of plant and equipment (固定资产处置) property taxes (财产税)
10-1 Nature of Plant and Equipment
The term plant and equipment is used to describe long-lived assets acquired for use in the operation of the business an not intended for resale to customers.
Non-depreciable asset The only plant asset not subject to depreciation is land, which has an unlimited term of existence.
10-2-2 Determining the Cost of Plant and Equipment
It is convenient to think of a plant asset as a stream of services to be received by the owner over a period of years. As the years go by, these services are utilized by the business and the cost of the plant asset is gradually transferred into depreciation expense.
The donated assets are recorded at their fair market value at the date of donation.
Donated Assets
Self-Constructed Assets
The cost of self-constructed assets is the money amounts of resources embodied in the asset.
10-2-1 Major Categories of Plant and Equipment
Plant and equipment items are often classified into the following groups:
Depreciable assets
Depreciable assets are plant assets with physical substance , which are expected to be used during more than one accounting period and have limited useful life.