ACCTMIS 2200
Property-Plant-Equipment
●Property-Plant-Equipment (P-P-E)
○Also called plant assets or long-lived assets.
○Long term assets that have a physical substance
■Land
■Building
■Equipment
●Four Accountable Events in the Life Cycle of P-P-E
1. Account for the acquisition of PPE .
■PPE assets are recorded at cost
■Cost is the purchase price plus all costs incurred in getting the asset ready for use. All of
these costs are incurred on the balance sheet as part of the cost of the asset. This is called
Capitalization .
■A cost is capitalized when it is recorded as part of an asset on the balance sheet rather than
as an expense on the income statement.
●Recurring, ongoing costs such as repairs after the asset is in use, maintenance, and
insurance are expensed as incurred.
●Once an asset is in use, only those costs that significantly improve the asset or
substantially expend its life are capitalized.
■A lump sum (basket) purchase is when a company purchases more than one asset for one,
lump-sum amount.
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