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Because land improvements have limited useful
lives, their costs are expensed (depreciated) over their useful lives. §        
Buildings– Buildings are facilities used in operations, such as stores, offices,
factories, warehouses, and airplane hangers. ·        
All necessary expenditures relating to the
purchase or construction of a building are charged to the building account. ·        
When a building is purchased, such costs
include the purchase price, closing costs (attorney's fees, title insurance,
etc.), and real estate broker's commissions. ·        
When a new building is constructed, its
cost consists of the contract price plus payments made by the owner for
architect's fees, building permits, and excavation costs. ·        
The inclusion of interest costs in the cost of a
constructed building is limited to the
construction period. §        
Equipment– Equipment includes assets used in operations, such as store check-out
counters, office furniture, factory machinery, delivery trucks, and airplanes. ·        
The cost of equipment consists of the cash
purchase price, sales tax, freight charges, and insurance during transit paid
by the purchaser, as well as expenditures required in assembling, installing
and testing the unit. ·        
Two criteria apply in determining the cost of
equipment: