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Intermediate Accounting: Reporting...
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Intermediate Accounting: Reporting...
Inclusion in Property, Plant, and Equipment Guthrie Inc. must determine whether the following items are included in property, plant, and equipment:
- a. idle equipment awaiting sale
- b. machinery kept on hand and used only when other machinery breaks
- c. land held for investment
- d. the right to publish a literary work
- e. progress payments on a building being constructed by a contractor
- f. fully depredated assets still being used
- g. expenditures to improve leased property
- h. equipment leased to others
- i. purchase of an asset with an expected life of 9 months
- j. obligation to remove leasehold improvement at the termination of a lease
Required:
- 1. Indicate which items are included in the cost of property, plant, and equipment and which items are excluded from the cost of property, plant, and equipment.
- 2. Next Level For each item excluded from property, plant, and equipment, explain why it was excluded.
1.
Identify those items that are included in the cost of property, plant, and equipment and indicate the items that are excluded from the cost of property, plant and equipment.
Property, Plant, and Equipment:
“Property, Plant, and Equipment” refers to the fixed assets, having a useful life of more than a year that is acquired by a company to be used in its business activities, for generating revenue.
Asset must have the following characteristics, to be included as property, plant and equipment:
- “The expected life of an asset must be more than one year”.
- “The asset should be used in operations and not for investment purpose”.
- “The asset should be tangible in nature”.
Items included in the cost of property, plant and equipment:
| b. Machinery kept on hand and used only when other machinery breaks |
| e... |
2.
Explain the reason for which the each item was excluded from property, plant and equipment.
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