LONG‐TERM INVESTMENTS

Long‐term investments  are generally (1) investments in stocks and bonds of other corporations that are held for more than one year, (2) long‐term assets such as land or buildings that a company is not currently using in its operating activities, and (3) long‐term notes receivable. In  Illustration 2-2 , Franklin Corporation reported total long‐term investments of $7,200 on its balance sheet.

Google Inc. reported long‐term investments on its balance sheet in a recent year as shown in  Illustration 2-4 .

ILLUSTRATION 2-4 Long‐term investments section

ALTERNATIVE TERMINOLOGY

Long‐term investments are often referred to simply as investments.

PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment  are assets with relatively long useful lives that are currently used in operating the business. This category includes land, buildings, equipment, delivery vehicles, and furniture. In  Illustration 2-2 , Franklin Corporation reported property, plant, and equipment of $29,000.

Depreciation is the allocation of the cost of an asset to a number of years. Companies do this by systematically assigning a portion of an asset’s cost as an expense each year (rather than expensing the full purchase price in the year of purchase). The assets that the company depreciates are reported on the balance sheet at cost less accumulated depreciation. The accumulated depreciation account shows the total amount of depreciation that the company has expensed thus far in the asset’s life. In  Illustration 2-2 , Franklin Corporation reported accumulated depreciation of $5,000.

Illustration 2-5  presents the property, plant, and equipment of Tesla Motors, Inc. in a recent year.

ILLUSTRATION 2-5 Property, plant, and equipment section

ALTERNATIVE TERMINOLOGY

Property, plant, and equipment is sometimes called fixed assets or plant assets.