BuyFindarrow_forward

Intermediate Accounting: Reporting...

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

Solutions

Chapter
Section
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.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

Describe Enterprise Risk Management (ERM).

Accounting Information Systems

Describe the four forms of organizational structure.

Foundations of Business (MindTap Course List)

How does a Pareto chart assist management?

Financial & Managerial Accounting

Go back to the summary page to see an estimate of the companys beta. What is the companys beta? What was the so...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

Identify eight forms and sources of waste.

Cornerstones of Cost Management (Cornerstones Series)