CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Chapter 8 Objectives 1.Define accounting terms related to plant assets and depreciation. 2.Identify accounting concepts and practices related to accounting for plant assets and depreciation. 3.Journalize entries for buying plant assets. 1 LESSON 8-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Chapter 8 Objectives 4.Calculate and record property tax expense. 5.Calculate and record depreciation expense for a plant asset using straight-line depreciation. 2 LESSON 8-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Chapter 8 Objectives 6.Journalize entries for disposing of plant assets. 7.Calculate depreciation expense using other methods. 3 LESSON 8-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 8-1 Buying Plant Assets

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Accounting Terms Current Assets—Cash and other assets expected to be consumed within a year. Plant Assets—Assets that will be used for a number of years in the operation of a business. Also Called Fixed Assets or long-term assets Ex: Land, Buildings, Equipment, etc. 5 LESSON 8-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Accounting Terms Plant Asset Record—an accounting form on which a business records information about each plant asset Prepared when you first BUY a plant asset 6 LESSON 8-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 7 LESSON Complete when asset is purchased. (Basic description information) 2.Complete when asset is disposed of. (How did you get rid of asset) 3.Complete each year to record annual depreciation expense. PLANT ASSET RECORD page

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 8 LESSON 8-1 BUYING A PLANT ASSET FOR CASH page 226 January 2. Paid cash for new copying machine, $1, Check No. 62. If you pay CASH for item use Cash Payments Journal.

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 9 LESSON 8-1 BUYING A PLANT ASSET ON ACCOUNT page 226 January 2. Bought an office computer on account from Discount Computers, $3, Memorandum No. 70. If you buy On Account use General Journal DO NOT use Purchases Journal because this is NOT merchandise to sell to customers

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Accounting Terms Real Property—Land and anything attached. Also referred to as Real Estate. Personal Property—All property NOT classified as “real” property. 10 LESSON 8-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Accounting Terms Assessed Value—the value of an asset determined by “tax authorities” for the purpose of calculating taxes. Generally based on the judgment of persons referred to as “assessors”. Assessors usually specially trained employees of a government unit. Ex: PWC Assessment office. Assessed value if for TAX PURPOSES ONLY!! NOTE: An assets assessed value may NOT be the same as the BOOK value. 11 LESSON 8-1

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 12 LESSON 8-1 CALCULATING AND PAYING PROPERTY TAX page 227 Feb 1. Paid cash for property tax, $3, Check No Annual Property Tax = Tax Rate  Assessed Value $65,  5% = $3, NOTE: Usually pay taxes for HALF of the year. BE VERY CAREFUL with Application problems to check timeframe!!

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 13 LESSON 8-1 TERMS REVIEW plant asset record real property personal property assessed value page 228

CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning Audit Your Understanding 1.What are the three sections of a plant asset record? 2.Why are asset purchases NOT recorded in a purchases journal? 3.What accounts are affected, and how, by an entry to pay property tax? 14 LESSON 8-1