A plumbing and heating business purchases a new pump for their truck. What type of asset is this?

A plumbing and heating business purchases a new pump for their truck. What type of asset is this?

• A. Fixed-Intangible
• B. Current-PP&E
• C. Fixed-PP&E
• D. Current-Inventory

Answer: (C)

When assets are evaluated, the key distinction is long-term, tangible items used in operations versus things held for sale or that are intangible. A pump installed on a service truck is a physical piece of equipment that will be used for multiple years to help the business generate revenue. That makes it a fixed, long-lived asset classified under property, plant, and equipment (PP&E). It’s not something the company intends to sell in the ordinary course of business, and it isn’t an intangible asset like a patent or software. It also isn’t a current asset or inventory, since its value isn’t expected to be realized within a year and it isn’t held for resale. Because it’s a long-term asset, the cost is capitalized and depreciated over its useful life, reflecting how its value contributes to operations over time.

When assets are evaluated, the key distinction is long-term, tangible items used in operations versus things held for sale or that are intangible. A pump installed on a service truck is a physical piece of equipment that will be used for multiple years to help the business generate revenue. That makes it a fixed, long-lived asset classified under property, plant, and equipment (PP&E). It’s not something the company intends to sell in the ordinary course of business, and it isn’t an intangible asset like a patent or software. It also isn’t a current asset or inventory, since its value isn’t expected to be realized within a year and it isn’t held for resale. Because it’s a long-term asset, the cost is capitalized and depreciated over its useful life, reflecting how its value contributes to operations over time.