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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Textbook Question
Chapter 10, Problem 1E
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.
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When an entity acquires land with a building on it and immediately tears down the building so that the land can be used for the construction of a plant, the cost incurred to tear down the building shall be
a. Expensed as incurred
b. Amortized over the estimated time period between the tearing down of the building and the completion of the plant
c. Added to the cost of the building
d. Added to the cost of the land
Based on the knowledge that you have learned from this unit and the relevant accounting standards, answer the following questions. Your answers must demonstrate your own understandings and applications of relevant accounting standards, but not a direct quote of the standards.
a.Use an example to explain what are included in the original cost of property, plant, and equipment when they are initially acquired.
b. What is the basic principle for valuing property, plant, and equipment acquired in exchange for other non-monetary assets?
c. Use an example to illustrate how gain or loss on disposal is calculated and recorded when an item of property, plant, and equipment is disposed of.
Which of the following is least likely capitalized as cost of land?
Grading, filling, draining clearing and similar site development activities Survey
Landscaping and similar improvements that have limited useful lives.
Special assessment
Subsequent to initial recognition, an entity shall use this model to account for its items of property, plant and equipment.
cost model revaluation model
fair value model Cost model or revaluation model as an accounting policy choice
It is the systematic allocation of the depreciable amount of an asset over its estimated useful life.
Depreciation Impairment
Revaluation all of these
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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- E10-1 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 depreciated 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_forwardWhich of the following is not a characteristics of an asset that us classified as property, plant and equipment? a. It has physical aubstance B. It is long term in nature C. It is acquired for use in business operations. D. It is acquired for resale. 2. Which of the following is excluded from " Property,plant and equipment? A. Major spare parts and long live stand by equipment.B. Building used in businessC. Equipment held for rentalsD. Held for sale assets 3. The initial cost of an item of property, plant, and equipment includes. A. Purchase cost B. Direct cost C. Decomissioning and restoration costD. All of these. 4.Which of the following is not capitalized as cost of land? A. Land improvements that have indifinite useful life B. Unpaid taxes on the property prior to the acquisition date not assumed by the entityC. Closing costs, such as titling and similar cost D Special assessment 5. Knife Co. Acquires a building by paying 6m and assuming a 2M unpaid mortgage on the building. How…arrow_forwardWhich one of the following internally-generated items may be eligible for capitalization as intangible assets in accordance with IAS 38 Intangible Assets? (Ignore business combinations.) Select one: a. Goodwill b. A pre-production prototype c. The cost of researching new material d. A customer listarrow_forward
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