• Unit 8: Accounting for Property, Plant, and Equipment

    Property, plant, and equipment require the largest amount of investment for a company. This unit introduces the life cycle of tangible long-term assets: acquisition, depreciation, and disposal. This unit also includes other long-term assets like natural resources and intangible assets. Businesses like mines and lumber companies account for resources that are extracted from the environment. The most common intangible asset is goodwill, which is recorded when acquiring a company. Major asset purchases can have a large impact on cash flow, taxes, and long-term profitability. It is important to understand how the accounting is handled,and what options a company has within the accounting rules, so smart strategic decisions can be made.

    Completing this unit should take you approximately 8 hours.

    • Upon successful completion of this unit, you will be able to: 

      • distinguish between tangible and intangible assets;
      • produce journal entries for the acquisition, depreciation, and disposal of fixed assets;
      • calculate depreciation expense using the various methods of depreciation; and
      • explain the difference between book value and market value.

    • 8.1: Property, Plant, and Equipment

      • Property, Plant, and Equipment Book

        This chapter introduces how organizations categorize and account for fixed assets. Assets are recorded at cost, not necessarily market value. It also covers the various methods of depreciation, why each method is used, and the "rate of return" expected by an organization when they purchase an asset. You should be able to explain fair market value, acquisition costs, historical costs, and which costs are capitalized. This chapter addresses the reality that all assets with the exception of land have a useful life. A business should expect some wear and tear on assets as a direct result of using them to support business activity. Depreciation is an allocation process that ensures the useful life of an asset is properly identified from accounting and company valuation.

      • Cost of Plant Assets Page
      • Capital Expenditures Page

        This video will explain how we should account for costs involved in the use of long-term assets after the initial purchase is recorded.

    • 8.2: Plant Asset Disposal, Natural Resources, and Intangible Assets

      • Plant Asset Disposals, Natural Resources, and Intangible Assets Book

        This chapter details the events that need to be dealt with when disposing assets. There are balance sheet and income statement entries that must be recorded when getting rid of equipment by scrapping it or selling it. It also discusses intangible assets, how to record them, and how to account for their diminishing value. Many business entities will eventually have to dispose of a plant asset. When this happens, the company will either have a loss or show a gain depending on the difference between the asset's sale price and its book value. You will learn the journal entries for a variety of situations, including a gain on the sale of an asset, a loss on the sale of an asset, how to realize loss, and what to do when a fire or flood that destroys an asset.

      • Accounting for Asset Disposal Page

        This video illustrates the disposal of an asset by scrapping. Your text also shows how to account for a sale or exchange.

      • Intangible Assets: Goodwill Example Page

        This video explains how intangible assets, such as Goodwill, are created and accounted for.

    • Unit 8 Assessment