 You might recall the historical cost principle tells us that our assets are recorded at their costs. We can expand that concept and apply it to plant assets. The cost of a plant asset includes all the costs incurred to get the asset ready for its intended purpose. So when we accumulate the cost of plant assets, we are talking about debiting an asset account for the costs incurred. The land account would be debited for all necessary costs incurred in making the land ready for its intended use, meaning we debit the land account when we incur the typical cost listed here. Notice that the cost of land is more than just the purchase price. There's a specific cost related to land that I would like to focus on because many students struggle with it. When we buy land and it has an old building that needs to be raised or a hill that needs to be flattened or a swamp that needs to be drained and filled in, all of these costs are land costs and would be debited to the land account. Let's look at an example. Bell and Sebastian acquire real estate at a cost of $90,000. The property contains an old building that is raised at a cost of $25,000. Additional expenditures include attorney's fees of $10,000 and real estate broker commissions of $15,000. So what is the amount reported for the cost of land? Since the cost of an asset is all the costs incurred to ready the asset for its intended purpose, all of these costs are debited to the land account and become the cost of the asset. Land improvements are enhancements to land that add value but have limited lives. So unlike land, which lasts forever, land improvements do not. Common examples of land improvements include driveways, parking lots, fences, landscaping, signing and lighting. Okay, so let's look at an example. Bell and Sebastian incur the following costs for improvements, fencing $25,000 and landscaping $5,000. What is the amount reported as the cost of land improvements? It's $30,000. Buildings are acquired through either construction or purchase. When an existing building is purchased, the following are typical costs. Purchase price, including closing costs and brokerage commissions. Also any remodeling or repairing of roof floor, electrical, wiring, plumbing, etc. All of these costs are debited to the building account. When a new building is constructed, the following are typical costs incurred. Contract purchase price, architectural fees, any permits or excavation costs, etc. Equipment includes all of the costs incurred to acquire the equipment and prepare it for use. Costs typically include the purchase price, sales tax, freight charges, insurance during transit, and any costs required in assembly, installation or testing. Again, let's look at an example. Bell and Sebastian incur the following costs for machinery. Price of $50,000, sales tax of $3,000, insurance during shipping of $500, and installation and testing costs of $1,000. So the total amount debited for the equipment account is $54,500. The final slide is a recap of the type of costs that are debited to plant asset accounts. We do this because the cost of a plant asset is all the costs incurred to ready the asset for its intended purpose.