From the course: Accounting Foundations: Asset Impairment
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A basic purchase
From the course: Accounting Foundations: Asset Impairment
A basic purchase
- Standard accounting practice dictates that the recorded amount of property, plant, and equipment includes any cost necessary to bring the asset to the condition and location for its intended use. For example, the acquisition cost of equipment includes any transportation charges, insurance in transit, installation and testing cost, and normal repairs needed before putting the asset into service. In the same way, the recorded amount for an intangible asset, such as a patent, is the cost to acquire that asset and to clear up all obstacles to the use of that intangible asset. Now as you know, businesses don't exist to buy long-term assets, instead businesses exist to make money by selling products and services. But a company needs an infrastructure of long-term operating assets to profitably produce and distribute these products and services. For example, General Electric needs factories in which to manufacture the aircraft…
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