Types of Costs Included in a Plant Asset

by Anthony Williams | on June 8, 2013  

Plant Asset Cost

 

These are some different types of cost included in a plant asset? Here, cost in this instance, according to Wild, Shaw and Chiappetta (2009), “includes all normal and reasonable expenditures necessary to get the asset in place and ready for its intended use” (p. 232).

For example, there is land cost which is, the total amount paid for land (Wild, et al.). This may include real estate commission, title insurance fees, legal fees, and accrued property taxes paid by purchaser (Wild, et al.). Cost includes monies paid to ready land for operation use (Wild, et al.). Also, any government assessments that add to land value and incur a cost (Wild, et al.). However, land improvement cost is charge to a different land improvement account.

Building Cost

Then there may be building cost, which can be the cost of building or purchasing a building (Wild, et al., 2009). Purchasing of a building may include, purchase price, brokerage fee, title fee, taxes, and attorney fee (Wild, et al.). As well, all expenditures in reading the building for intended use is added to cost (Wild, et al.). But when a building is constructed all material and labor, as well as, a reasonable amount of overhead is added to cost (Wild, et al.).

Machinery and Lump-sum Purchase Cost

 

Further, there is machinery and equipment cost, which amounts to any cost normal and necessary to purchase and prepare them for intended use (Wild, et al., 2009). Such as, purchase price, taxes, transportation charge, insurance while in transit, and installation, assembling and testing said machinery and equipment (Wild, et al.).

Next there is what’s “called lump-sum purchase, or group, bulk, or basket purchase” (Wild, et al., 2009, p. 324). The cost of purchasing assets in this way is allocated among each type based on asset market value (Wild, et al.).

Reference

Wild, J. J., Shaw, K. W., & Chiappetta, B. (2009). Financial and Managerial Accounting: Information for Decisions (3^rd ed.). McGraw-Hill/Irwin, Inc.,