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
HORNGREN'S FINANCIAL & MANGERIAL ACCOUNT
- Which of the following items should be accounted for as a capital expenditure?a. The monthly rental cost of an office buildingb. Costs incurred to repair leaks in a building’s roofc. Maintenance fees paid with funds provided by the company’s capitald. Taxes paid in conjunction with the purchase of office equipmentarrow_forwardQualifying building expenditure (QBE) is a capital expenditure incurred on theconstruction or purchase of a building that is used as an industrial building. (a) Discuss the expenses that qualify for a constructed building. (b) Determine expenses that could not be included for a constructed building. Please help me elaborate more in details the answers in essay form. tq and much appreciatedarrow_forwardThe demolition costs of an old building before a new building is constructed as: included as cost of land included as cost of old building included as cost of new building recognized as lossarrow_forward
- The following are capital expenditures EXCEPT the decoration of office space installation of an air conditioning system O fire insurance on a building renovation of office spacearrow_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_forwardIndicate where the following items would be shown on abalance sheet.(a) A lien that was attached to the land when purchased.(b) Landscaping costs.(c) Attorney’s fees and recording fees related to purchasingland.(d) Variable overhead related to construction of machinery.(e) A parking lot servicing employees in the building.(f) Cost of temporary building for workers during constructionof building.(g) Interest expense on bonds payable incurred duringconstruction of a building.(h) Assessments for sidewalks that are maintained bythe city.(i) The cost of demolishing an old building that was onthe land when purchased.arrow_forward
- 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.arrow_forwardWhich of the following is considered capital expenditure Select one: a. Research expenses. b. Purchase of office consumables. c. Cost of material to construct new plant. d. Staff overtime.arrow_forwardThe cost of installing new equipment would be debited to which of the following accounts? Oa. Land Improvements Ob. Buildings Oc. Repairs and Maintenance Expense Od. Machinery and Equipmentarrow_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_forwardAll of the following costs associated with acquiring a building should be capitalized except a. The costs of buildings permits b. The cost of a strike associated with the construction of the building c. the contract price d. the costs of excavation for the buildingarrow_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