In this lesson, Nick Palazzolo, CPA, breaks down the intricacies of reporting fixed assets on the balance sheet, including considerations for their acquisition costs. He clarifies why assets like Property, Plant, and Equipment (PP&E) are valued at historical cost and how this is balanced with accumulated depreciation to reflect an asset's fair value over time. Throughout the lesson, Nick delves into the various expenditures that make up the historical cost, such as purchase price, transportation, taxes, and legal fees, and explains how these costs contribute to the depreciable base of the asset. Additionally, Nick differentiates between depreciation for fixed assets, depletion for natural resources, and amortization for intangible assets, giving examples of each method to illuminate the process of asset cost allocation over its useful life.
Lesson: Cost of Acquiring Fixed Assets
In this lesson, Nick Palazzolo, CPA, breaks down the intricacies of reporting fixed assets on the balance sheet, including considerations for their acquisition costs. He clarifies why assets like Property, Plant, and Equipment (PP&E) are valued at historical cost and how this is balanced with accumulated depreciation to reflect an asset's fair value over time. Throughout the lesson, Nick delves into the various expenditures that make up the historical cost, such as purchase price, transportation, taxes, and legal fees, and explains how these costs contribute to the depreciable base of the asset. Additionally, Nick differentiates between depreciation for fixed assets, depletion for natural resources, and amortization for intangible assets, giving examples of each method to illuminate the process of asset cost allocation over its useful life.
Updated: Oct. 20, 2021 Create an account