WGU D104 Intermediate Accounting II Units 2-3(Complete)2023
These characteristics:
They are acquired for use in operations and not for resale.They are long-term in nature and usually depreciated They possess physical substance.Describe what? - Answer property, plant, and equipment Only asset that is NOT depreciated - Answer land PP&E - Answer property, plant, and equipment historical cost - Answer the cash or cash equivalent price of obtaining the asset and bringing it to the location and condition necessary for its intended use companies should NOT write up property, plant, and equipment to reflect fair value when it is above cost - Answer true if the fair value of the property, plant, and equipment is less than its carrying amount, the asset may be written down - Answer true Removal of old buildings—clearing, grading, and filling—is a - Answer land cost includes the purchase price, freight and handling charges incurred, insurance on the equipment while in transit, cost of special foundations if required, assembling and installation costs, and costs of conducting trial runs. - Answer cost of equipment full-costing approach - Answer Assign a portion of all overhead to the construction process Money borrowed to pay building contractor (signed a note), $300 - Answer other, non property, plant and equipment ($300) Refund of 1-month insurance premium because construction completed early - Answer listed under building Wilson Co. purchased land as a factory site for $1,350,000.Wilson paid $120,000 to tear down two buildings on the land.Salvage was sold for $8,100.Legal fees of $5,220 were paid for title investigation and making the purchase.Architect's fees were $46,800. Title insurance cost $3,600, and liability insurance during construction cost $3,900.Excavation cost $15,660.The contractor was paid $4,200,000.An assessment made by the city for pavement was $9,600. - Answer $1,480,320 Correct. Removal of old buildings—clearing, grading, and filling—is a land cost because this activity is necessary to get the land in condition for its intended purpose. Architect Fees, liability insurance, and excavation are included in the cost
of the building. Therefore, the cost of the land is calculated as: $1,350,000 +
$120,000 - $8,100 + $5,220 + $3,600 + $9,600 = $1,480,320. 1 / 2
WGU D104 Intermediate Accounting II Units 2-3(Complete)2023 GAAP requires you to capitalize ___ costs incurred during construction - Answer actual the amount capitalized is the lesser of actual interest cost incurred during the period or avoidable interest or The amount of interest to capitalize is limited to the lower of actual interest cost incurred during the period or avoidable interest - Answer true AAE - Answer Average accumulated expenditures-the total expenditures during the period, therefore the debt could have been avoided AAE can be calculated with - Answer weighted or simple average capitalized interest= - Answer weighted-average accumulated expenditures x% of interest companies should record property, plant, and equipment at ____ value of what they give up or at _____ value of the asset received, whichever is more clearly evident. - Answer the fair value To properly reflect cost, companies account for assets purchased on long-term credit contracts at the ______ value of the consideration exchanged between the contracting parties at the date of the transaction. - Answer present prudent cost concept - Answer if for some reason a company ignorantly paid too much for an asset originally, it is theoretically preferable to charge a loss immediately Burchell Company purchased land and a building for a lump sum cost of $420,000.The land has a fair market value of $160,000 and the building has a fair market value of $320,000.What is the cost assigned to the land? - Answer $140,000 When a purchase is made at a lump-sum price, the company allocates the cost based on the relative fair values of the assets. The land has a fair value of $160,000/($160,000 + $320,000) or 33.333333%. The cost allocated to the land is $420,000 x 33.3333333% or $140,000.substitution method - Answer remove the old asset and accumulated depreciation, recognize a loss, and capitalize the new cost expenditures that increase an asset's useful life or increase the efficiency or quality of production should be - Answer capitalized companies (can or cannot) accrue in advance for planned major overhaul costs either for interim or annual periods. - Answer cannot For additions you - Answer Capitalize cost of addition to asset account.
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