Tuesday, 25 December 2012
TANGIBLE
ASSETS
based on the course by André Altmeyer
Certain types of assets receive special treatment for accounting purposes. For tangible assets with an anticipated useful life of more than one year, a company uses a process called depreciation to allocate part of the asset's expense to each year of its useful life, instead of allocating the entire expense to the year in which the asset is purchased. source
Problem
Gaillard Logistics purchased land
paying 175.000 € cash as a down payment and signing a 190.000 € note payable
for the balance. The company had also to pay:
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Nature of payment
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amount in €
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Tax property
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3 500
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Title insurance
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3 000
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Levelling the land and removal of
unwanted building
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9 000
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Addition of soil for the foundation of
the building
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59 000
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Construction of a building
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650 000
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Fence around the property
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55 000
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Company sign near the entrance
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14 000
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Lighting of the grounds
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8 000
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801 500
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Prepare
· Determine cost of Gaillard Logistics’ land,
land improvements and building.
Plan
Consider each cash out and determine
if it is a capital expenditure (to be added to the cost of the non-current
asset) or a expense (to be recorded as a expense in the Income Statement).
Execute:
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Cost of land
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amount in €
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Land /
down payment
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175 000
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Land /
note payable
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190 000
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Tax property
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3 500
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Title
insurance
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3 000
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Levelling the land and removal of unwanted
building
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9 000
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380 500
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Cost of land improvements
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Cost of
land improvements
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amount in
€
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Fence around the property
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55 000
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Company sign near the entrance
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14 000
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Lighting of the grounds
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8 000
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77 000
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Cost of the building
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Cost of the building
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amount in €
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Addition of soil for the foundation of
the building
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59 000
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Construction of a building
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650 000
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709 000
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Journal
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DATE
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ACCOUNT & EXPLANATIONS
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DEBIT
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CREDIT
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XX
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XX
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Land
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380 500,00
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Land
improvements
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77 000,00
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Building
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709 000,00
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Cash
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1 166 500,00
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Note
Payable
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190 000,00
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Cost of
the YY project
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