BUS1 121A Lecture 10: CHAPTER 10
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Includes any money spent to make the asset ready for use: purchase price, shipping & insurance, taxes & duties. Improvements: enhance the use of an asset, extend the useful life of an asset. Repairs & maintenance: assume to occur when estimating an asset"s useful life. Benefits: advertising always expensed, research & development usually expensed (software is an exception) Land: purchase price, closing costs, special gov. assessments, cost of removing an existing building, building never used & want to get rid off, no depreciation. Improvements: fences, parking lots, signs, swimming pool, some landscaping. Buildings: purchase/construction price, demolition of an existing building, interest on loans to finance constructions, remodeling of buildings before use, building used & want to replace. Asset exchanges value the transaction at the fair market value of the asset received. Substance: a transaction has a commercial substance if it is expected to result in a significant change in future cash flows.
