F3 M4 Flashcards
Historical cost = CV - acc depr - impairment
When an asset is donated, it is recognized at FMV + incidental costs incurred by debiting
fixed asset and crediting gain on nonreciprocal transfer
When land has been purchased for the purpose of constructing a building, all of the
costs associated w/getting the land to to use are included in the costs of the land (these
costs include filling a hole or leveling, legal fees, existing obligations assumed by
buyer like mortgages, and costs of demolition)
Costs incurred to pave driveways and parking lots IS NOT added to the cost of building
a warehouse because it is an ORDINARY REPAIR (it must be done every 10-15 years)
If someone buys land that has a vacant building on it and wants to sell the building, the
gain that the comp gets from selling the building and the sale of any scrap is deducted
from the cost of the land
County assessment for sewer lines and title search fees are included in the cost of land
Proceeds from the sale of existing buildings (such as selling metal from the old land)
would be subtracted from the land price
Land improvements are depreciable bc they will all have to be replaced in the future (ex:
sidewalks, parking lots, and fencing)
Costs of plant include repair charges neglected by the previous owner, architect’s fees,
and digging a hole for the foundation
When land and building are bought as a bundle, their prices must be allocated based on
appraised values of each
Costs of equipment include sales taxes, freight-in and installation charges
Additions, improvements and replacements, and extraordinary repairs must be
capitalized
Ordinary repairs should be expensed
For replacements, I must remove the CV of the old asset (the thing being replaced) and
recognize a gain or loss on it if the CV is known
If CV not known, I must increase the life of the asset by debiting acc depr and crediting
cash
