Financial Accounting: PPE and Intangibles
Financial Accounting: PPE and Intangibles
Financial Accounting: PPE and Intangibles
Eleventh Edition
Global Edition
Chapter 7
PPE and
Intangibles
Book Value
Plant assets are recorded on the balance sheet at their
book value.
Book Value = Cost − Accumulated Depreciation
• Depreciation
– Process of allocating a plant asset’s cost to
expense over its life
– Necessary as plant assets wear out, grow
obsolete, and lose value over time
– Allocates cost against revenue it helps earn each
period
– Depreciation expense is reported on the income
statement
– Land is not depreciated
• Cost
‒ Purchase price and all costs to get plant asset
ready for use, known amount
• Estimated Useful Life
‒ Length of service expected from using the asset,
estimated amount
• Estimated Residual Value
‒ Expected cash value of an asset at the end of its
useful life, estimated amount