Plant Assets: Plant assets are referred to the long-term and tangible assets that business use in its business operations. Plant assets are also popularly known as Property, Plant, and Equipment or simply the Fixed Assets.
To Identify: The cost that is not recorded as part of the cost of the building.
Answer to Problem 1QC
Explanation of Solution
Explanations:
The expenses that are incurred to increase the efficiency of the building or increase the useful life of the building or make the building ready to use, would be considered as the cost of the building. On the other hand, expenses incurred to keep the building in good usable condition are referred to as maintenance cost that are treated as revenue expenditures.
In option a, b, and c the expenses incurred are to make the building ready for use, and therefore should be considered as cost of the building. But in option d, annual building maintenance is incurred to keep the building in good condition.
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Chapter 9 Solutions
MYLAB ACCOUNTING WITH PEARSON ETEXT --
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- When 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_forwardRequired: 1. At what amount should Edwards record the cost of the land and the new building, respectively? If an input box should be blank, enter a zero. Land Building Purchase price of land Demolition of old building Architect's fees Legal fees Construction costs Salvaged materials Total 2. Next Level If management misclassified a portion of the building's cost as part of the cost of the land, what would be the effect on the financial statements?arrow_forwardMerchant Company purchased property for a building site. The costs associated with the property were: What portion of these costs should be allocated to the cost of the land and what portion should be allocated to the cost of the new building?arrow_forward
- College Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,