Plant assets are:
A) Tangible assets used in the operation of a business that have a useful life of more than one accounting period.
B) Current assets.
C) Held for sale
D) Intangible assets used in the operations of a business that have a useful life of more than one accounting period.
E) Tangible assets used in the operation of business that have a useful life of less than one accounting period.
The correct answer and explanation is :
The correct answer is A) Tangible assets used in the operation of a business that have a useful life of more than one accounting period.
Explanation:
Plant assets, also known as fixed assets or property, plant, and equipment (PP&E), are tangible assets that are used in the regular operations of a business. These assets have a long-term use, typically with a useful life extending beyond one accounting period (usually over a year). Examples include buildings, machinery, vehicles, land, and equipment.
Key Characteristics of Plant Assets:
- Tangible Nature: Plant assets are physical or tangible in nature, which distinguishes them from intangible assets like patents or trademarks.
- Long-Term Use: These assets are not intended for resale but rather for long-term use in the production of goods or services. They are expected to provide value to the business over multiple accounting periods.
- Depreciation: Most plant assets (except for land) lose value over time due to wear and tear, which is recorded as depreciation. Depreciation allocates the cost of the asset over its useful life and reduces its book value.
- Not Held for Sale: Unlike current assets that are expected to be sold or used up within one year, plant assets are typically held for operational use and are not intended for sale in the normal course of business.
Examples:
- Buildings: A company might own office buildings, factories, or warehouses that it uses for operations.
- Machinery and Equipment: These are tools or machines used in manufacturing, production, or providing services.
- Vehicles: Trucks, delivery vans, or company cars used for business purposes.
By contrast, other options in the question do not correctly describe plant assets:
- B) Current assets are expected to be converted into cash or consumed within one year.
- C) Held-for-sale assets are those that the company intends to sell within the normal course of business.
- D) Intangible assets, like goodwill or patents, are non-physical and cannot be classified as plant assets.
- E) Tangible assets with a useful life of less than one accounting period would typically be classified as current assets rather than plant assets.
Thus, plant assets are crucial for businesses that rely on long-term, tangible resources for their operations.