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Video instructions and help with filling out and completing What Form 4797 Expenditures

Instructions and Help about What Form 4797 Expenditures

In this video, we're going to talk about the costs that are capitalized when a firm acquires property, plant, and equipment. So, you might be thinking, whatever the cost is of a building, a piece of land, or equipment, let's say it's $800 for a piece of equipment, that cost is what's going to become the asset's value when we record that piece of equipment on the balance sheet. And you'd be right, but you can't neglect other costs. For example, let's say there was $50 in shipping and handling to get this machine to your firm. Then, the amount that you're going to initially record on the balance sheet is actually going to be $850. So, you don't just include the purchase price, that's certainly part of it, but you also include the shipping and handling. There are a lot of different types of costs that can be involved with property, plant, and equipment when you acquire them. So, I just want to give you an overview of those costs and show you how they would affect your calculations. Let's start with property, specifically a piece of land. We're assuming here that this isn't land you just buy for speculative purposes and have no intention of building anything on. If that were the case, then the land would be accounted for as a long-term investment for the firm. We're talking about land where you intend to build a warehouse or a manufacturing plant. The purchase price, the amount you pay for the land, is definitely going to be included in the land's initial asset value. But also, any cost to prepare the land for use. When I talk about preparing the land for use, I mean let's say there's an old building on the land that you have to remove...