Accounting Exam 4 Questions and
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Long-Lived Assets - Tangible and intangible resources owned by a
business and used in its operations over several years.
Business assets acquired for use over one or more years.
Not intended for resale.
Examples of Long...
fencing, lighting, and sprinkler systems that are added to improve the
usefulness of land. Differ from land in that they deteriorate over time,
whereas land is assumed to last forever.
Construction in Progress - ✔✔Includes the costs of constructing new
buildings and equipment. When construction is finished, these costs are
moved from this account into the building or equipment account to which
they relate.
General Rule for Tangible Assets Under the Cost Principle - ✔✔All
reasonable and necessary costs to acquire and prepare an asset for use
should be recorded as a cost of the asset.
Capitalized Costs - ✔✔To record a cost as an asset, rather than an
expense
Capitalizing Costs Effects - ✔✔Increases Assets on Balance Sheet, and
decreases expenses on the income statement.
Costs That Should Be Capitalized (Land) - ✔✔-Purchase cost
-Legal fees
-Survey fees
-Title search fees
, Costs That Should Be Capitalized (Equipment) - ✔✔-Purchase/
construction cost
-Sales taxes
-Transportation costs
-Installation costs
Costs That Should Be Capitalized (Buildings) - ✔✔-Purchase/ construction
cost
-Legal fees
-Appraisal fees
-Architect fees
Capitalizing Costs for Land, Buildings, Equipment - ✔✔If a company buys
land, a building, or a piece of used equipment and incurs demolition,
renovation, or repair costs before it can't be used, these additional costs
are capitalized as a cost of the land, building, or equipment. These costs
are capitalized because they are needed to prepare the asset for use.
Basket Purchase - ✔✔When land, buildings, and equipment are purchased
together. When this occurs, the total cost is split among the assets in
proportion to the market value of the assets as a whole.
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