Arnold, fallen hunky stockbroker who had, in the world of "As Passion Swells," found Redemption in the grease and sweat of manual labor, sat now at a cafe with his true love, Rhonda.

They were sipping Sparkling Water and gazing out over the blue Pacific.

"What will you do about Lena?" asked Rhonda.

"I'm married to her, and I intend to do right by her. But," said Arnold, leaning in and taking Rhonda's glistening, tanned hand, "It's you that I love." He drew her hand to his lips and kissed it gently.

"Well then, Arnold," she said, withdrawing it, "You're going to have to tell her about us. You're going to have to decide."

The waiter at this seaside cafe looked a great deal like Charles (The Bug) Deatherage. He approached the table and laid out the menu.

"Our specials for the day are Property, Plant, and Equipment."

"Mmmmm," said Arnold, licking his lips.

Rhonda, who was, by her dress and the car she drove (a Jaguar) more the businessman of the two, expressed a concern.

"Isn't property, plant, and equipment the value of the land, buildings, machinery and other stuff the company uses?"

"Yes, it is. It's the amount the company could sell the assets for in the open market." said the Bug. "And we serve it with fresh pepper."

"But on the menu it looks a bit pricey. How is the dollar amount of Property, Plants, and Equipment determined?"

1) It is the original cost of the assets less their accumulated depreciation.

2) The Bug-Waiter is right: it's the amount the company could get for the assets.

3) It is the amount the company would have to spend to replace the assets.

4) None of the above.

Enter your selection in the field to the lower right, and get immediate feedback on the answer!

The answer is 1) It is the original cost of the assets less their accumulated depreciation..

PPE, often called "fixed assets," appear at their costs less accumulated depreciation. Accounting does not normally use market prices, either selling prices or replacement costs, for fixed assets. Several reasons are: the company usually does not intend to sell these assets, so their market resale prices are not relevant information; original cost is a verifiable, objective number, while market prices (selling or buying) are less so, and in fact change over time; financial statements portray the stewardship of the managers, so it is natural to show how they spent the money entrusted to them by shareholders.

In the main room at Roman, Wise, and Pecunia, people were going about their daily tasks. Most of the people at the brokerage were nice, decent people. But for reasons that will become clear in later stories, the less decent characters were rising to the top. Their meanness was in large part what was carrying them.

Roman, Wise, and Pecunia was in deep trouble.

In that conference room, in The Bug's fevered brain, bizarre occurrences were taking place. As he handed a new glass of Sparkling Water to the patrons on the patio, he saw a bluish-grey scum rising to the top of the glass. His customers seemed not to notice. And he knew that in some way, he himself was destined to rise, in exactly the same manner.

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