1106.0 Plant Assets: Definition – Division of Finance (2024)

FAQs

1106.0 Plant Assets: Definition – Division of Finance? ›

A plant asset is an asset with a useful life of more than one year that is used in producing revenues in a business's operations. Plant assets are also known as fixed assets.

Plant assets are long-term fixed assets that are used to make or sell products and services for a company. These assets are tangible and projected to be monetarily beneficial to a business for more than one year.

Capitalized plant assets include Land, Land Improvements, Buildings, Building Improvements, Fixed Equipment, Moveable Equipment, Software, Donated Equipment, other assets, and other expenditures which meet the criteria.

The four main categories of plant assets are equipment, land, buildings, and improvements.

Property, plant, and equipment are also called fixed assets. They are physical assets that a company cannot easily liquidate or sell. PP&E assets are considered noncurrent assets, or long-term investments. Noncurrent assets like PP&E have a useful life of at least one year.

1) Patent is not classified as plant assets.

Plant assets are tangible assets used in a company's operations that have a useful life of more than one accounting period. Current assets are those assets that are held by the business to convert into cash or for use within a short period (within a year).

Plant Assets: Plant assets (also called PP&E or fixed assets) refer to property that is tangible (can be seen and touched) and is used in the business to generate revenue. Plant assets include depreciable assets and land used in the business.

Plant assets include all long-lived tangible assets used to generate the principal revenues of the business. Inventory is a tangible asset but not a plant asset because inventory is usually not long-lived and it is held for sale rather than for use.

The correct answer is a) land, land improvements, buildings, and equipment.

Is plant assets part of total assets? ›

Businesses must be especially careful in making these investments since buildings and land are immovable and can't be easily substituted. Depending on the industry, plant assets may make up either a very substantial percentage of total assets, or they may make up only a small part.

The correct answer is b) A truck held for resale by an autombile dealership. Answer b) would be considered inventory because the asset is being held for sale whereas property, plant, and equipment are held for use in operations.

The cost of a plant asset is equal to the purchase price plus sales taxes, delivery charges, and installation charges. Estimated useful life can be calculated using past experiences. The IRS publishes guidelines on disposal values. The estimated value of a plant asset at its replacement time; also called salvage value.

The four main examples of plant assets, or PP&E, are land, equipment, buildings, and improvements. These assets provide considerable value to a company, and they have a long lifespan. Transferring an asset through a lease agreement can be difficult, especially if the asset comes with improvements.

Plant assets must be depreciated because the cost of use needs to be matched with the associated revenues. The depreciation process is an estimate of cost against the value of an asset, but it does not mean that there will not be differences in value at asset disposal.

Note that plant assets include Land, Buildings, Land Improvements and Equipment. "Building Improvements" is not a plant asset.

Depreciation applies to three classes of plant assets: land improvements, buildings, and equipment. Each of these classes is considered to be a depreciable asset because the usefulness to the company and the revenue-producing ability of each class decline over the asset's useful life.

Answer: b) used in the operations of a business. A characteristic of a plant asset is that it is used in the operations of a business.

Definition of Sale of a Plant Asset

The sale of a plant asset is often the disposal of a company's equipment (or other asset) that had been used in the company's business operations.