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Intermediate Accounting: Reporting...

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

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Acquisition

Among the principal topics related to the accounting for property, plant, and equipment of a company are acquisition and retirement.

Required:

  1. 1. Explain the expenditures that a company capitalizes when it acquires equipment for cash.
  2. 2. Assume that a company cannot determine the market value of equipment acquired by reference to a similar purchase for cash. Explain how the company determines the cost of equipment purchased by exchanging it for each of the following 3 items:
    1. a. Bonds having an established market price.
    2. b. Bonds that do not have an established market price.
    3. c. Common stock not having an established market price.
    4. d. Similar equipment having a determinable market value.
  3. 3. Explain the factors that a company uses to determine whether it capitalizes expenditures relating to property, plant, and equipment already in use.

1.

To determine

Provide explanation regarding the expenditures that a company capitalizes if acquires equipment for cash.

Explanation

During the purchase (acquirement) of an equipment, the expenditures that are capitalized comprises the invoice price of the equipment plus all expenses associated to its purchase or preparation for use for exam...

2.a

To determine

Explain the manner in which the company ascertains the cost of the equipment purchased by exchanging bonds having an established market price.

2.b

To determine

Provide explanation regarding the expenditures that a company capitalizes if bonds do not have an established market price

2.c

To determine

Provide explanation regarding the expenditures that a company capitalizes if common stock does not have established market price.

2.d

To determine

Provide explanation regarding the expenditures that a company capitalizes if similar equipment has determinable market value.

3.

To determine

Provide explanation for the factors that is used by company to ascertain whether it capitalizes expenditures relating to property, plant and equipment.

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