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Assigning costs to plant assets C1 Q
Listed below are costs (or discounts) to purchase or construct new plant assets. (1) Indicate whether the costs should be expensed or capitalized (meaning they are included in the cost of the plant assets on the
Expensed or Asset
Capitalized Category
_ _ 1. Wages paid to train employees to use new equipment.
_ _ 2. Invoice cost paid for new equipment,
_ _ 3. Early payment discount taken on the purchase of new equipment.
_ _ 4. Realtor commissions incurred on land purchased.
_ _ 5. Property taxes on land incurred after it was purchased,
_ _ 6. Costs of oil for the truck used to deliver new equipment.
_ _ 7. Costs to lay foundation for a new building.
_ _ 8. Insurance on a new building during its construction.
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Chapter 10 Solutions
Fundamental Accounting Principles
- Listed below are costs (or discounts) to purchase or construct new plant assets. (1) Indicate whether the costs should be expensed or capitalized (Meaning they are included in the cost of the plant assets on the balance sheet.) (2) For costs that should be capitalized, indicate in which category of plant assets (Equipment, Building, or Land) the related costs should be recorded on the balance sheet. List 1. Costs to clear and grade land purchased for a new plant. 2. Parking ticket fees incurred by the delivery truck that illegally parked when delivering new equipment. 3. Demolition costs to remove an old building on land purchased. 4. Janitorial costs incurred to clean equipment. 5. Repair costs to fix new equipment damaged by the crew that unpacked it. 6. Costs to lay foundation for a new building. 7. Costs to unpack and assemble new equipment. 8. Costs charged by a contractor to install new equipment into the production line. Categoryarrow_forwardCost includes all costs necessary to bring the asset to a working condition for its intended use. Which of these costs are taken as a part of cost of assets? I. Invoice price II. Transportation cost III. Installation charges I and II II and III I, II and III I and IIIarrow_forwardListed below are costs (or discounts) to purchase or construct new plant assets. (1) Indicate whether the costs should be expensed or capitalized (Meaning they are included in the cost of the plant assets on the balance sheet.) (2) For costs that should be capitalized, indicate in which category of plant assets (Equipment, Building, or Land) the related costs should be recorded on the balance sheet. List 1. Costs to install necessary lighting in a new building. 2. Costs to clear and grade land purchased for a new plant. 3. Costs to lay foundation for a new building. 4. Construction costs for a new building to be used in operations. 5. Costs charged by a contractor to install new equipment into the production line. 6. Fees to perform necessary tests of new equipment. 7. Costs to pay a crew to test new equipment for a day to ensure it was working properly. 8. Sales tax on new equipment purchased.arrow_forward
- What is the general rule for cost inclusion for plant assets?arrow_forwardTrinkle Company made several purchases of long-term assets during the year. The details of each purchase are presented here. New Office Equipment 1. List price: $42,600; terms: 2/10, n/30; paid within the discount period. 2. Transportation-in: $880. 3. Installation: $400. 4. Cost to repair damage during unloading: $630. 5. Routine maintenance cost after eight months: $150. Basket Purchase of Copier, Computer, and Scanner for $52,500 with Fair Market Values 1. Copier, $23,421. 2. Computer, $12,027. 3. Scanner, $27,852. Land for New Warehouse with an Old Building Torn Down 1. Purchase price, $83,800. 2. Demolition of building, $4,760. 3. Lumber sold from old building, $1,780. 4. Grading in preparation for new building, $7,900. 5. Construction of new building, $279,000.arrow_forwardPreparing an asset for sale after its useful life is a: a. Maintenance support cost b. Production and Construction cost c. Disposal cost d. Research and development costarrow_forward
- Identify the various costs included in the initial cost of property, plant, and equipment, natural resources, and intangible assets.arrow_forwardWhat is the criterion a company uses to decide whether to include an expenditure in the cost of property, plant,and equipment rather than expensing it? Give an example of the types of expenditures that are included in the cost of property, plant and equipment as a result of the application of this criterionarrow_forwardWhat is the process of allocating the cost of a plant asset over its useful life called?arrow_forward
- Research and development costs a. Are recorded as research and development assets. b. Are capitalized and then amortized. c. Should be included in the cost of the patent they relate to. d. Should be expensed.arrow_forwardWhat is a portion of plant asset cost allocated as expense for the period? What is the difference between the plant asset cost and the related accumulated depreciation?arrow_forwardDepreciation of property, plant and equipment is the process of asset valuation for statement of financial position purposes asset valuation based on current replacement cost data allocation of the asset's cost over its useful life fund accumulation for the replacement of the assetarrow_forward
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