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Questions and Answers
Which of the following is NOT a type of plant asset mentioned in the text?
Which of the following is NOT a type of plant asset mentioned in the text?
- Land
- Inventory (correct)
- Buildings
- Computer system
What is another term used to refer to plant assets?
What is another term used to refer to plant assets?
- Capital Investments
- Business Assets
- Property, Plant, and Equipment (correct)
- Plant Inventory
Why is it challenging to determine the full cost invested in plant assets?
Why is it challenging to determine the full cost invested in plant assets?
- Plant assets may be sold or traded in
- It is difficult to track installation, shipping, and other related costs (correct)
- Plant assets last several years
- Plant assets are relatively expensive
What should be done with the cost of plant assets over the years they are expected to be used?
What should be done with the cost of plant assets over the years they are expected to be used?
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Why is accounting for the disposal of a plant asset important?
Why is accounting for the disposal of a plant asset important?
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Study Notes
Plant Assets
- Land, Buildings, Machinery, Equipment, and Natural Resources are types of plant assets.
- Another term used to refer to plant assets is Property, Plant, and Equipment (PPE).
Challenges in Determining Plant Asset Costs
- It is challenging to determine the full cost invested in plant assets because it includes not only the purchase price but also additional costs such as transportation, installation, and testing.
Accounting for Plant Assets
- The cost of plant assets should be allocated over the years they are expected to be used through depreciation, which is the systematic allocation of the cost of a tangible asset over its useful life.
Importance of Accounting for Disposal of Plant Assets
- Accounting for the disposal of a plant asset is important because it allows companies to accurately reflect the decrease in value of the asset and report any gain or loss on disposal.
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