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AccountingIntermediate Accounting: Reporting And Analysis3rd Edition

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Chapter 10, Problem 2E
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Intermediate Accounting: Reporting...

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

Solutions

Chapter
Section
Problem 1GI
Problem 2GI
Problem 3GI
Problem 4GI
Problem 5GI
Problem 6GI
Problem 7GI
Problem 8GI
Problem 9GI
Problem 10GI
Problem 11GI
Problem 12GI
Problem 13GI
Problem 14GI
Problem 15GI
Problem 16GI
Problem 17GI
Problem 18GI
Problem 19GI
Problem 20GI
Problem 21GI
Problem 1MC
Problem 2MC
Problem 3MC
Problem 4MC
Problem 5MC
Problem 6MC
Problem 7MC
Problem 8MC
Problem 9MC
Problem 10MC
Problem 1RE
Problem 2RE
Problem 3RE
Problem 4RE
Problem 5RE
Problem 6RE
Problem 7RE
Problem 8RE
Problem 9RE
Problem 10RE
Problem 11RE
Problem 12RE
Problem 1E
Problem 2E
Problem 3E
Problem 4E
Problem 5E
Problem 6E
Problem 7E
Problem 8E
Problem 9E
Problem 10E
Problem 11E
Problem 12E
Problem 13E
Problem 14E
Problem 15E
Problem 16E
Problem 17E
Problem 18E
Problem 19E
Problem 20E
Problem 21E
Problem 1P
Problem 2P
Problem 3P
Problem 4P
Problem 5P
Problem 6P
Problem 7P
Problem 8P
Problem 9P
Problem 10P
Problem 11P
Problem 1C
Problem 2C
Problem 3C
Problem 4C
Problem 5C
Problem 6C
Problem 7C
Problem 9C
Problem 10C
Problem 11C
BuyFindarrow_forward

Intermediate Accounting: Reporting...

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

Determination of Cost Carr Company must determine whether the following items are included in property, plant, and equipment:

  1. a. contract price
  2. b. list price
  3. c. freight costs
  4. d. discounts taken
  5. e. discounts not taken
  6. f. installation costs
  7. g. testing costs
  8. h. cost of major overhaul of equipment
  9. i. costs of grading land prior to construction
  10. j. tax assessment for street improvements
  11. k. delinquent property taxes on acquired property
  12. l. cost of tearing down an old building (already owned) in preparation for new construction
  13. m. cost of insurance during construction
  14. n. avoidable interest costs during construction
  15. o. landscaping costs
  16. p. severance pay for employees dismissed because of the acquisition of a new machine
  17. q. cost of tearing down a building on newly acquired land
  18. r. replacement of an electric motor in a machine
  19. s. expansion of the heating/cooling system to accommodate an expansion of a building and certain expected future needs
  20. t. purchase price of a service contract for 2 years on the acquired asset
  21. u. cost of training new employees

Required:

  1. 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. 2. Next Level What is the general rule that should be followed in determining which costs are included in property, plant, and equipment?

1.

To determine

Identify the items that are included in the cost of property, plant, and equipment and state the items that are excluded from the cost of property, plant and equipment.

Explanation

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.

Determination of cost:

The procurement or acquisition cost of “property, plant and equipment” comprises of all costs that are required to “obtain the benefits to be derived from the asset”.

Items that are included in the cost of property, plant and equipment are as follows:

a. Contract price
c. Freight costs
f. Installation costs
g. Testing costs
h. Cost of major overhaul of equipment
i. Costs of grading land prior to construction
j. Tax assessment for street improvements
k. Delinquent property taxes on acquired property
m. Cost of insurance during construction (could be expensed)
n. Avoidable interest costs during construction (not imputed interest)
o. Landscaping costs
q. Cost of tearing down a building on newly acquired land
r...

2.

To determine

Explain the general rule that must be followed in ascertaining the costs that are included in property, plant and equipment.

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Ch-10 P-1GICh-10 P-2GICh-10 P-3GICh-10 P-4GICh-10 P-5GICh-10 P-6GICh-10 P-7GICh-10 P-8GICh-10 P-9GICh-10 P-10GI
Ch-10 P-11GICh-10 P-12GICh-10 P-13GICh-10 P-14GICh-10 P-15GICh-10 P-16GICh-10 P-17GICh-10 P-18GICh-10 P-19GICh-10 P-20GICh-10 P-21GICh-10 P-1MCCh-10 P-2MCCh-10 P-3MCCh-10 P-4MCCh-10 P-5MCCh-10 P-6MCCh-10 P-7MCCh-10 P-8MCCh-10 P-9MCCh-10 P-10MCCh-10 P-1RECh-10 P-2RECh-10 P-3RECh-10 P-4RECh-10 P-5RECh-10 P-6RECh-10 P-7RECh-10 P-8RECh-10 P-9RECh-10 P-10RECh-10 P-11RECh-10 P-12RECh-10 P-1ECh-10 P-2ECh-10 P-3ECh-10 P-4ECh-10 P-5ECh-10 P-6ECh-10 P-7ECh-10 P-8ECh-10 P-9ECh-10 P-10ECh-10 P-11ECh-10 P-12ECh-10 P-13ECh-10 P-14ECh-10 P-15ECh-10 P-16ECh-10 P-17ECh-10 P-18ECh-10 P-19ECh-10 P-20ECh-10 P-21ECh-10 P-1PCh-10 P-2PCh-10 P-3PCh-10 P-4PCh-10 P-5PCh-10 P-6PCh-10 P-7PCh-10 P-8PCh-10 P-9PCh-10 P-10PCh-10 P-11PCh-10 P-1CCh-10 P-2CCh-10 P-3CCh-10 P-4CCh-10 P-5CCh-10 P-6CCh-10 P-7CCh-10 P-9CCh-10 P-10CCh-10 P-11C

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