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Self-Construction Harshman Company constructed a building for its own use. The company incurred costs of $40,000 for materials and supplies, $68,000 for direct labor, and $7,000 for a supervisor’s overtime that was caused by the construction. Harshman uses a factory overhead rate of 50% of direct labor cost. Before construction, the company had received a bid of $162,000 from an outside contractor. Required: 1. Assuming common practice is followed, at what value should Harshman capitalize the building? 2. Next Level What is the justification for determining the value described in Requirement 1? 3. Next Level Would your answer change if the bid from the outside contractor had been $135,000?

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
Publisher: Cengage Learning
ISBN: 9781337788281
BuyFind

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
Publisher: Cengage Learning
ISBN: 9781337788281

Solutions

Chapter
Section
Chapter 10, Problem 15E
Textbook Problem

Self-Construction Harshman Company constructed a building for its own use. The company incurred costs of $40,000 for materials and supplies, $68,000 for direct labor, and $7,000 for a supervisor’s overtime that was caused by the construction. Harshman uses a factory overhead rate of 50% of direct labor cost. Before construction, the company had received a bid of $162,000 from an outside contractor.

Required:

  1. 1. Assuming common practice is followed, at what value should Harshman capitalize the building?
  2. 2. Next Level What is the justification for determining the value described in Requirement 1?
  3. 3. Next Level Would your answer change if the bid from the outside contractor had been $135,000?

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Chapter 10 Solutions

Intermediate Accounting: Reporting And Analysis
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