EBK FINANCIAL ACCOUNTING THEORY AND ANA
12th Edition
ISBN: 9781119299646
Author: CATHEY
Publisher: JOHN WILEY+SONS,INC.-CONSIGNMENT
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Question
Chapter 2, Problem 2.5C
(a)
To determine
Introduction: Fixed asset refers to tangible assets used in the business operations having a useful life of more than one year and provides long-term financial gain.Fixed assets are used by the company in the production of goods and services which helps in generation of revenue.
To find:Whether building classifies the definition of an asset considering it is used as a plant that is producing automobiles.
(b)
To determine
Introduction: Fixed asset refers to tangible assets used in the business operations having a useful life of more than one year and provides long-term financial gain.Fixed assets are used by the company in the production of goods and services which helps in generation of revenue.
To find: Whether building classifies the definition of an asset considering company is not using the buildingbut plans to sell it.
(c)
To determine
Introduction: Fixed asset refers to tangible assets used in the business operations having a useful life of more than one year and provides long-term financial gain.Fixed assets are used by the company in the production of goods and services which helps in generation of revenue.
To find: Whether building classifies the definition of an asset considering company is not using the building but plans to remodel it for using it as a plant to produce automobiles.
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To what extent do you consider the following items to be proper costs of the fixed asset? Give reasons for your opinions.
a. Overhead of a business that builds its own equipment.
b. Cash discounts on purchases of equipment.
c. Interest paid during construction of a building.
d. Cost of a safety device installed on a machine.
e. Freight on equipment returned before installation, for replacement by other equipment of greater capacity.
f. Cost of moving machinery to a new location.
g. Cost of plywood partitions erected as part of the remodeling of the office.
h. Replastering of a section of the building.
i. Cost of a new motor for one of the trucks.
The right-of-use asset may be measured using the following models except for:
Group of answer choices
All are allowed measurement models.
Cost model, and the right-of-use asset is held for rentals
Fair value model, and the right-of-use asset is used as an office building
Revaluation model, and the right-of-use asset is used a factory warehouse
Companies that acquire intangible assets under IFRS may only utilize the revaluation model if the useful life of the asset can be easily identified. b. The intangible asset has a thriving market for sale. You have a reliable way of calculating the intangible asset's cost. D. The intangible property consists of money.
Chapter 2 Solutions
EBK FINANCIAL ACCOUNTING THEORY AND ANA
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Similar questions
- What is the effective life of an asset? a. The total period of ownership of the asset, including when it is not installed and ready for use.. b. The period prior to the asset being abandoned or scrapped. c. The period that the asset can be used for income-producing purposes. d. All of the above.arrow_forwardA company may acquire property, plant, and equipment and intangible assets for cash, in exchange for a deferred payment contract, by exchanging other assets, or by a combination of these methods. Required: 1. Identify six types of costs that should be capitalized as the cost of a parcel of land. For your answer, assume that the land has an existing building that is to be removed in the immediate future in order that a new building can be constructed on the site. 2. At what amount should a company record an asset acquired in exchange for a deferred payment contract? 3. In general, at what amount should assets received in exchange for other nonmonetary assets be valued? Specifically, at what amount should a company value a new machine acquired by exchanging an older, similar machine and paying cash?arrow_forwardWhich 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 occupancyarrow_forward
- 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_forwardBased 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.arrow_forwardWhich of the following costs are capitalized when purchasing a piece of equipment? a. The invoiced price of the equipment b. Sales taxes c. All installation costs related to the equipment d. All of the abovearrow_forward
- Interest costs related to which of the following types of assets qualify for interest capitalization? An asset a company manufactures and sells on a routine basis. An asset ready for its intended use at the time of purchase. An asset a company constructs as a discrete project for sale or lease, or an asset a company constructs for its own All of the abovearrow_forwardWhich of the following is/are not capitalized as an intangible asset? Select one: a. Legal costs to defend a patent successfully and goodwill acquired when a company purchases another company. b. Costs of an internally developed patent and goodwill acquired when a company purchases another company. c. Costs of an internally developed patent and legal costs to defend a patent successfully. d. Goodwill acquired when a company purchases another company and costs to purchase a patent. e. Costs to purchase a patent and legal costs to defend a patent successfully.arrow_forwardWhich of the following is an investment property? Property that is currently being redeveloped to be sold in the ordinary course of business operations. Property that is currently being developed for future use as owner-occupied. Property that is leased out to another entity under a finance lease Building rented out in an operating lease whereby the owner provides minimal services. Which of the following assets may be classified as investment property? Land Building Equipment Land and Building only Intangible asset If ancillary services provided to occupants of a property held are <List A>, the property is classified as <List B> A B a. significant investment property b. insignificant property, plant and equipment (PPE) c. significant allocated to investment property and PPE d. insignificant…arrow_forward
- Under IFRS, what cost is specifically excluded from being capitalized as part of the cost of an investment property? Question 7 options: a) Delivery of materials needed for construction of an investment property. b) Standard wasted material costs incurred in the construction of an investment property. c) Losses incurred after construction is complete and before the property is fully occupied. d) Replacement of a key component of the investment property with more environmentally friendly parts.arrow_forwardThe following expenditures shall be expensed when incurred, except O Payment in advance of delivery of goods or the rendering of services. O Start up costs O Advertising and promotion costs O Business relocation or reorganization costs Which of the following items would qualify as an intangible asset? * College tuition fees paid to employees who decide to enroll in an executive MBA program while working with the company. O Legal costs paid to intellectual property lawyers to register a patent. O Advertising and promotion on the launch of a huge product. Operating losses during the initial stages of the project. Which is not considered a research and development activity? O Design, construction and operation of a pilot plant. O Laboratory research aimed at discovery of new knowledge. O Conceptual formulation and design of possible product or process. O Routine on-going effort to refine, enrich or improve quality of existing product. Which statement is correct concerning the amortization…arrow_forwardWhen 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 landarrow_forward
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