Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN: 9781337788281
Author: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher: Cengage Learning
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Question
Chapter 10, Problem 2E
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.
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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Which of the following are includable to the cost of property and equipment?
Transportation costs on machinery purchased under terms FOB shipping point
Interest on loans borrowed to purchase an equipment
Installation costs and cost of trial runs of a machinery
Repairs on broken glass windows of a purchased buildings prior to occupancy
In the summation (cost) method of valuation, which of the following steps is the ONLY one that a valuer would take in estimating value? a. Estimate the net operating income of the property. b. Determine the value of the land using the Assessed Annual Value and tax rate. c. Estimate the accrued depreciation. d. Calculate the acquisition price of the construction material used when the structure was built.
which of the following should be included in the cost of equipment:
(a) installation charges
(b) freight charges
(c) cost of building foundations
(d) new parts needed to replace those damagedwhile unloading
(e) borrowing costs incurred to finance the purchase of the equipment.
Correct answer please
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Chapter 10 Solutions
Intermediate Accounting: Reporting And Analysis
Ch. 10 - Prob. 1GICh. 10 - Prob. 2GICh. 10 - What is the relationship between the book value...Ch. 10 - Prob. 4GICh. 10 - Prob. 5GICh. 10 - Prob. 6GICh. 10 - What are asset retirement obligations? How should...Ch. 10 - Prob. 8GICh. 10 - Prob. 9GICh. 10 - Prob. 10GI
Ch. 10 - At what amount does a company record the cost of a...Ch. 10 - Prob. 12GICh. 10 - Prob. 13GICh. 10 - Prob. 14GICh. 10 - Prob. 15GICh. 10 - Prob. 16GICh. 10 - Prob. 17GICh. 10 - What is the distinction between a capital and an...Ch. 10 - Distinguish between additions and...Ch. 10 - Distinguish between ordinary repairs and...Ch. 10 - Prob. 21GICh. 10 - Hickory Company made a lump-sum purchase of three...Ch. 10 - Prob. 2MCCh. 10 - Electro Corporation bought a new machine and...Ch. 10 - Prob. 4MCCh. 10 - Lyle Inc. purchased certain plant assets under a...Ch. 10 - Ashton Company exchanged a nonmonetary asset with...Ch. 10 - Prob. 7MCCh. 10 - Prob. 8MCCh. 10 - Prob. 9MCCh. 10 - Prob. 10MCCh. 10 - On January 1, Duane Company purchases land at a...Ch. 10 - Prob. 2RECh. 10 - Utica Corporation paid 360,000 to purchase land...Ch. 10 - Prob. 4RECh. 10 - Prob. 5RECh. 10 - Prob. 6RECh. 10 - Nabokov Company exchanges assets with Faulkner...Ch. 10 - Prob. 8RECh. 10 - Dexter Construction Corporation is building a...Ch. 10 - Prob. 10RECh. 10 - Prob. 11RECh. 10 - Ricks Towing Company owns three tow trucks. During...Ch. 10 - Inclusion in Property, Plant, and Equipment...Ch. 10 - Prob. 2ECh. 10 - Acquisition Costs Voiture Company manufactures...Ch. 10 - Determination of Acquisition Cost In January 2019,...Ch. 10 - Asset Retirement Obligation Big Cat Exploration...Ch. 10 - Prob. 6ECh. 10 - Prob. 7ECh. 10 - Prob. 8ECh. 10 - Exchange of Assets Two independent companies,...Ch. 10 - Exchange of Assets Use the same information as in...Ch. 10 - Prob. 11ECh. 10 - Exchange of Assets Goodman Company acquired a...Ch. 10 - Exchange of Assets Use the same information as in...Ch. 10 - Prob. 14ECh. 10 - Self-Construction Harshman Company constructed a...Ch. 10 - Prob. 16ECh. 10 - Prob. 17ECh. 10 - Prob. 18ECh. 10 - Prob. 19ECh. 10 - Expenditures after Acquisition McClain Company...Ch. 10 - Prob. 21ECh. 10 - Prob. 1PCh. 10 - Classification of Costs Associated with Assets The...Ch. 10 - Prob. 3PCh. 10 - Comprehensive At December 31, 2018, certain...Ch. 10 - Assets Acquired by Exchange Bremer Company made...Ch. 10 - Assets Acquired by Exchange Bussell Company...Ch. 10 - Self-Construction Olson Machine Company...Ch. 10 - Prob. 8PCh. 10 - Prob. 9PCh. 10 - Events Subsequent to Acquisition The following...Ch. 10 - Prob. 11PCh. 10 - Prob. 1CCh. 10 - Prob. 2CCh. 10 - Cost Issues Deskin Company purchased a new machine...Ch. 10 - Prob. 4CCh. 10 - Prob. 5CCh. 10 - Prob. 6CCh. 10 - Prob. 7CCh. 10 - Prob. 9CCh. 10 - Prob. 10CCh. 10 - Prob. 11C
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- 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.arrow_forwardThe following are costs related to the purchase of a second-hand piece of equipment. Required: Indicate with an 'X' in the appropriate column whether the expenditure should be included in the cost of the asset. Include in the Not included Asset total In the Asset Total Description of cost expenditure Freight Installation Repair of vandalism during installation Replacement of worn-out parts at time of purchase Repair of damage incurred in reconditioning the equipment Fees paid to attorney to review purchase agreement B Computer equipment that was originally purchased for $ 170,000 and now has an accumulated depreciation balance of $ 130,000 is sold for cash of $ 60,000 Total $ 360,000 Required: Record the sale of the computer equipment…arrow_forwardWhen a company purchases land with a building on it and immediately tears down thebuilding so that the land can be used for the construction of a plant, the costs incurredto tear down the building should be:a. expensed as incurredb. added to the cost of the plantc. added to the cost of the landd. amortized over the estimated time period between the tearing down of thebuilding and the completion of the planarrow_forward
- Which of the following statements is/are FALSE: I. Following the acquisition of an item of property, plant and equipment, subsequent expenditure for this item that will extend the asset’s useful life and increase the asset’s capacity is capitalised. II. Investment property does not get depreciated, unless it is measured at cost. III. In the statement of comprehensive income, costs can be analysed according to function or nature. Costs analysed according to function are classified into the following categories: distribution & selling costs; administrative expenses; other operating expenses (or income). IV. Because of the prudence convention, inventories are expensed in the income statement as cost of goods sold when they are sold, and not when they are bought in by the business and paid for. V. A complete set of financial statements consists of the statement of financial position, the statement of comprehensive income, the statement of changes in equity and the statement of…arrow_forwardIndicate whether each of the following statements is true or false. When land with an old building is purchased as a future building site, the cost of removing the old building is part of the cost of the new building. Answer Special assessments for local improvements such as streetlights and sewers should be accounted for as land improvements. Answer Avoidable interest is the amount of interest cost that a company could theoretically avoid if it had not made expenditures for the asset.arrow_forwardWhich of the following gross valuation methods on a building would most likely be used by a construction firm in its financial and management accounting of its projects? a.) Unit in place b.) Quantity survey method c.) Square Footage method d.) none of the abovearrow_forward
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