Question

Listed below are certain costs or discounts incurred in the purchase or construction of new plant assets.1. Indicate whether the costs should be expensed or capitalized.2. For costs that should be included in plant assets, indicate in which category of plant assets (Equipment, Building, or Land) the related costs should be recorded on the balance sheet.1. Charges incured to train employees to use new equipment.2. Invoice cost to purchase new equipment3. Deduction for an earl payment discount taken on the puchase of new equipment.4. Real estate commissions incurred on land purchased for a new plant.5. Property taxes on land incurred after it was purchased6. Costs of tune-up for the truck used to deliver new equipment7. Costs to lay foundation for a new building8. Insurance on a new building during the construction phase.

Answer 1

Answer

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Explanation  

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Answer 2

The costs that should be expensed or capitalized are indicated as follows:

1. The cost of training employees so that they can use new equipment should be expensed.

2. The cost of purchasing new equipment should be capitalized as Equipment.

3. The early payment discount received for the purchase of new equipment should be capitalized (reducing the cost of Equipment).

4. The real estate commissions incurred on land purchased for a new plant should be capitalized as Land.

5. Property taxes on Land incurred after the land purchase should be expensed, not capitalized.

6. The costs of tune-up for the truck used to deliver new equipment should be expensed because it was not wholly incurred for the new equipment.

7. The costs to lay the foundation for a new building should be capitalized as Building.

8. The insurance expense on a new building during the construction phase should be capitalized as Building.

Thus, the costs that should be expensed do not add to the costs of the plant assets.

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