Textbook Problem

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?