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l. Explain the accounting for plant asset expenditures. The cost of plant assets includes (1] all espeudittues necessary to acquire the asset and {2] make
l. Explain the accounting for plant asset expenditures. The cost of plant assets includes (1] all espeudittues necessary to acquire the asset and {2] make it ready for its intended use. lDnce cost is established, a company uses that amount as the basis of accounting for the plant asset over its useful life. 3. Apply depreciation methods to plant assets. Depreciation is the process of allocating to expense the cost of a plant asset over its useful {service} life in a rational and systematic manner. Depreciation is not a process of valuation, and it is not a process that results in an accumulation of cash. Depreciation reects an asset's decreasing usefulness and revenueproducing ability, resulting from 1wear and tear and from obsolescence. The formula for straightline depretjatiou is: (Cost Salvage value)! Useful life (in years] The expense patterns of the three depreciation meiods are as follows: Method Annual Depreciation Pattem Straightline Constant amount Declining-balance Decreasing amount Unitsofactivity Varying amount Companies make revisions of periodic depreciation in present and fuhue periods, not retroactively
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