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LESSON 18-1

LESSON 18-1. Buying Plant Assets and Paying Property Tax. Original created by M.C. McLaughlin, Thomson/South-Western Modified by Deborah L. Burns, Johnston County Schools, West Johnston High School. Buying Plant Assets & Paying Property Tax.

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LESSON 18-1

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  1. LESSON 18-1 Buying Plant Assets and Paying Property Tax Original created by M.C. McLaughlin, Thomson/South-Western Modified by Deborah L. Burns, Johnston County Schools, West Johnston High School

  2. Buying Plant Assets & Paying Property Tax • Assets that will be used for a number of years in the operation of a business are known as plant assets. • A business may have several types of plant assets, including equipment, buildings, & land • Businesses often subdivide plant assets into more focused categories & create an account for each category • Office equipment • Warehouse equipment • Automobiles • Computers • Furniture & Fixtures LESSON 18-1

  3. Buying Plant Assets & Paying Property Tax • Most plant assets are useful for only a limited period of time • Over time, most equipment wears out and loses value • The cost of a plant asset should be depreciated over its useful life • Each plant asset account should have a related accumulated depreciation account – a contra asset account – to accumulate the annual depreciation expanse of the plant assets in the account • Land is generally not subject to depreciation. It is considered permanent and is not depreciated LESSON 18-1

  4. RECORDING THE BUYING OF A PLANT ASSET page 535 • Procedures for recording the buying of a plant asset are similar to procedures for recording the buying of current assets such as supplies • The amount paid for a plant asset is debited to a plant asset account with a title such as Store Equipment LESSON 18-1

  5. 4 RECORDING THE BUYING OF A PLANT ASSET page 535 January 3, 20X1. Paid cash for a display case, $3,250.00. Check No. 4. 1 2 3 1. Account title 3. Cash paid 2. Cost of the plant asset 4. Post LESSON 18-1

  6. CALCULATING AND PAYING PROPERTY TAX page 536 • For tax purposes, state & federal governments define two kinds of property – real & personal • Land & anything attached to the land is called real property (sometimes referred to as real estate) • All property not classified as real property is called personal property LESSON 18-1

  7. CALCULATING AND PAYING PROPERTY TAX – ASSESSED VALUES page 536 • The value of an asset determined by tax authorities for the purpose of calculating taxes is called the assessed value • Assessed value is usually based on the judgment of persons referred to as assessors • The assessed value of an asset may not be the same as the value on the business’s or individual’s records • The assessed value is assigned to an asset for tax purposes only • Usually the assessed value is only a part of the true value of the asset LESSON 18-1

  8. AssessedValue × Tax Rate = AnnualProperty Tax CALCULATING AND PAYING PROPERTY TAX page 536 • A governmental taxing unit determines a tax rate to use in calculating taxes • The tax rate is multiplied by an asset’s assessed value, not the value recorded on a business’s records $60,000.00 1.2% = $720.00 × LESSON 18-1

  9. TERMS REVIEW page 537 • real property • personal property • assessed value LESSON 18-1

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