Fixed Assets

Question 1

Excavation cost on land

Answer 1

if excavation cost are incurred as part of the preping the land, then include in the land. If incurred as part of the building, then include in the building.

Question 2

what is included in the cost Equipment

Answer 2

Any cost incurred to acquire and make ready a plant asset is capitalized.

Question 3

Interest costs and fixed assets.

accttng for assets intended to be used internally, versus sold.

Answer 3

interest costs related to construction should be capitalized based on the weighted average of accumulated expenditures.
Avoidable interest equals the interest on the weighted-average amount of accumulated expenditures ($40,000). Capitalized interest equals the smaller of the total interest incurred or the avoidable interest. Thus, capitalized interest equals $40,000.

Question 4

improvements and replacements

Answer 4

if Carrying value of the old machine is identifiable, enter the following J/E
Dr: capitalized cost of the improvements
cr; Old asset at carrying value
cr: loss

if the value is unkown,

Question 5

accting for interest cost used during the construction period.

Answer 5

interest costs incurred during the construction period of machinery to be used by a firm as a fixed asset, should be capitalized as part of the historic cost of acquiring the fixed asset. Interest costs on the fixed asset subsequent to the construction period as well as all interest costs on the routine manufacture of machinery for sale to customers (inventory) should be expensed in the income statement for the period incurred.

Question 6

Valuation of land

Answer 6

Include all cost to make land ready for construction of building. Interest expenses are not included.

Question 7

Depreciable Base

Answer 7

Original Cost - Salvage Value