Discussion Questions: Please answer the following two questions separately. Quoted material is not allowed. Please write the answer in your own words.
1.Companies have a significant amount of investment in long-lived assets, which include property, plant and equipment (commonly referred to as plant assets), and intangible assets.Let’s begin by talking about plant assets. Can you tell us what kind of plant assets are used in your company or place of business? Do you have an estimate of the amount invested in those plant assets?
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2. Why are liabilities classified on a balance sheet as current and noncurrent? Who wants to know? What is the benefit of knowing this information?
Reflection question: please write reflection on the following students’ post separately.
Many years ago I worked at a bowling alley and amusement center in Newport, Rhode Island. I worked there during the era when manual scoring was replaced by the computer scoring monitors. While there is the obvious building, lanes, pin re-setting and ball return plant assets, these computer monitors became one of the more expensive assets for the center. During the 1990’s the technology was poor and the accuracy was even poorer. However, with the addition of these monitors, business readily increased. While I have no idea how much they cost, I know that they were a substantial investment for the business. It did prove to be a wise investment, because scoring bowling can be complicated for those that just want to throw a ball down the lane, maybe get more pins knocked down than beers. Computers are almost standard equipment at bowling alleys at this point.
Plant assets like everyone else has identified are long-lived assets that are tangible such as land, buildings, and equipment. The expense that is associated with plant assets is called depreciation. I work for a large company so to estimate how much we have invested in plant assets is going to be a bit of a SWAG. To begin with even though we are a large company to save on costs the company doesn’t have a lot of plant assets because we are primarily a service-based company. The plant assets we do have are office furniture, and office signage. The company support government contracts and expenses any equipment that is needed for a contract to the government. The company also leases the buildings it needs to support government contracts. It does not make sense for a company to build their own warehouses or office building because most contract only last 3 – 5 years and there are no guarantees that the incumbent will keep the work. If the work is lost the leases for building are often transferred to the new company.
The office I work out of is 14,000 square feet with 75 workstations. I would estimate our furniture assets at approximately $20k when it was new.
Student C: I think the reason to classify the liabilities two different kinds are to differ between the obligation that are reasonably expected to be liquidated in less than one year. and the others which are the obligation whose settlement due extends beyond one year.
Knowing the difference is so important since the current liabilities are due to below of one year and that would affect the cash and other assets that could be liquidate and to be transferred to cash in one year.