ACCT 310: Chapter 10

True or false: The initial cost of property, plant, and equipment includes the purchase price and all expenditures necessary to bring the asset to its desired condition and location for use.

True

Which of the following costs should be capitalized in the costs of acquiring a building? (Select all that apply.)

remodeling building legal fees to obtain title realtor commissions

Which of the following items should always be capitalized in the cost of equipment? (Select all that apply.)

sales tax installation and testing of equipment freight to deliver the equipment legal fees to establish title

Clarion purchases land and prepares it for use. Which of the following items should be capitalized as land improvements? (Select all that apply.)

cost of driveways cost of lawn sprinkler system cost of sidewalks

Which of the following items should be capitalized as land improvements? (Select all that apply.)

cost of fences cost of sidewalks cost of parking lots

The costs incurred after a natural resource has been discovered but before production begins are referred to as

development costs.

Long-term assets are typically classified in one of these two categories:

property, plant, and equipment intangible assets

The costs included in the natural resource account includes (Select all that apply.)

development costs. restoration costs. exploration costs. acquisition costs.

Sherman Corporation purchases land for $100,000. Sherman incurs the following costs associated with the land acquisition: Property taxes for current year $3,000 Cost of removing old building 7,000 Title insurance 1,000 Cost of grading 4,000 Delinquent property taxes 2,000

$114,000 Rationale: $100,000 + $7,000 + $1,000 + $4,000 + $2,000 = $114,000

Which of the following should be included in the cost of buildings?

Real estate commissions relating to purchase of building

Which of the following items should be capitalized in the cost of equipment? (Select all that apply.)

freight to deliver the equipment to its location insurance on equipment during shipping Purchase price installation and testing of equipment

Sarah purchases land to be used for a new storage facility. Which of the following items are capitalized in the cost of land? (Select all that apply.)

real estate agent commissions costs to remove an old building legal fees to secure title

From a financial reporting perspective, property, plant, and equipment and intangible assets exhibit the following characteristics (Select all that apply.)

revenue-producing long-lived

Which of the following are classified as natural resources? (Select all that apply.)

timber tracts mineral deposits

Larry purchases land to be used for a new corporate headquarters. Which of the following items are capitalized in the cost of land? (Select all that apply.)

title insurance legal fees to secure title grading the land costs to remove an old building

The purchase price and all costs to bring an asset to its desired condition and location for use should be ______.

Capitalized

The distinction between land and land improvements is that:

land has an indefinite life