ch09 intermediate accounting nikolai 課后習(xí)題解答

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1、 CHAPTER 9 PROPERTY, PLANT, AND EQUIPMENT: ACQUISITION AND DISPOSAL CONTENT ANALYSIS OF EXERCISES AND PROBLEMS Number Content Time Range (minutes) E9-1 Determination of Cost. Analysis of numerous items to determine whether or not to include in property, plant,

2、and equipment. 5-10 E9-2 Property, Plant, and Equipment. Analysis of various items for potential balance sheet inclusion. 5-10 E9-3 Acquisition Costs. Compute total acquisition costs of machine and prepare journal entry to record. 5-10 E9-4 Acquisition Cost. Journ

3、al entry to record acquisition. Analysis of entry if price not available. 5-15 E9-5 (AICPA adapted). Acquisition Cost. Determination of cost and journal entry to record acquisition. 5-15 E9-6 (AICPA adapted). Acquisition of Land and Building. Computation of land and new bu

4、ilding cost. 10-15 E9-7 Lump Sum Purchase. Cost assigned to land, buildings, and equipment. 10-15 E9-8 Exchange of Assets. No boot, similar productive assets. Journal entries. 10-15 E9-9 Exchange of Assets. Boot, similar productive assets, loss. Journal entries. 10

5、-15 E9-10 Exchange of Assets. Boot, similar productive assets, gain. Journal entries. 10-15 E9-11 Exchange of Assets. No boot, dissimilar productive assets. Journal entries. 10-15 E9-12 Exchange of Assets. Boot, dissimilar productive assets. Journal entries. 10-15

6、 E9-13 (AICPA adapted). Exchange of Assets. No boot, similar productive assets. Determination of amount to be shown in the accounting records. 5-10 9-51 Number Content Time Range (minutes) E9-14 Self-Construction. Determination of amount to be capitalized. Eval

7、uation under differing outside contractor's bids. 10-15 E9-15 Donation. Journal entry to record acquisition. Financial statement disclosure. Time differences for passage of title. 10-20 E9-16 Interest During Construction. Compilation of amount to be capitalized. Financial stat

8、ement disclosure. 5-15 E9-17 Interest During Construction. Compute amount of capitalized interest and interest revenue. 5-15 E9-18 Expenditures. Capital vs. operating. Classification of various items. 5-10 E9-19 (Appendix). Oil and Gas Accounting. Successful eff

9、orts, full-cost methods. Determination of expense and balance sheet value. 10-20 P9-1 Acquisition Costs. Reclassification of erroneously recorded items. Journal entries. 20-30 P9-2 Costs Subsequent to Acquisition. Adjusting entries to correct the books from improperly recorded

10、costs. Acquisition, legal fees, insurance, additions, repairs. 45-60 P9-3 Cost Classification. Journal entries to record various transactions. Acquisition, parking lot, sale, lease, freight, installation, taxes. 25-35 P9-4 (CMA adapted). Self-Construction. Computation accordin

11、g to GAAP of amount to be capitalized. Identification of any alternative procedures. 30-45 P9-5 Acquisition Cost. Acquisition, replacement, purchase. Journal entries to record various transactions. 20-30 P9-6 (AICPA adapted). Comprehensive: Analysis of Changes in Fixed Assets.

12、 Preparation of schedules for changes in land, building, leasehold improvements, and machinery and equipment. 25-35 P9-7 Assets Acquired by Exchange. Various situations dealing with similar or dissimilar productive assets and boot. Journal entries. 40-60 P9-8 Assets Acquired b

13、y Exchange. Various situations dealing with similar or dissimilar productive assets, boot, and changing fair value. Journal entries. 30-45 Number Content Time Range (minutes) P9-9 Interest During Construction. Computation of amount to be capitalized and amount to be dep

14、reciated. Straight-line. Effects on financial statements. 20-30 P9-10 Comprehensive: Interest Capitalization. Computation of amounts of capitalized interest, interest expense, and interest revenue. Journal entries to record construction costs, including interest. 40-60 P9-11 E

15、vents Subsequent to Acquisition. Replacement, repairs, demolition. Journal entries to record various transactions. 20-30 P9-12 (AICPA adapted). Comprehensive: Adjusting Entries. Analysis of machinery and equipment account. Schedules to show effect of additions and retirements on accou

16、nt balances. Journal entries. 40-60 P9-13 (AICPA adapted). Adjusting Entries. Analysis of the building account. Journal entries to adjust the account as necessary. Supporting computations. 40-60 P9-14 (Appendix). Oil and Gas Accounting. Successful efforts, full-cost methods.

17、 Financial statement disclosure. 10-20 ANSWERS TO QUESTIONS Q9-1 For a company to include an asset in the category of property, plant, and equipment, the asset must: (1) be held for use in the normal course of business; (2)?have an expected useful life of more than one year; and (3)?b

18、e tangible property - that is, the asset must have physical substance. Q9-2 Generally, a company capitalizes the expenditures that are necessary to obtain the benefits to be derived from the asset and includes them as a cost of property, plant, and equipment. The expenditures include the costs i

19、ncurred in the acquisition of an asset and in putting the asset into operating condition. The company expenses the costs of maintaining the benefits at the levels originally expected. Q9-3 A company classifies land held for investment on the balance sheet as an investment. It does not include t

20、he land as property, plant, and equipment, since it is not being used in the normal course of business in a productive capacity. Q9-4 The book value of an asset is the recorded acquisition cost less the accumulated depreciation recorded to date. Q9-5 At the date of acquisition, the acquisition

21、 cost is equal to the market value. At the end of the life of the asset, the book value should equal the residual value (a market value). During the life of the asset, there is no defined relationship between the book value and market value because depreciation is a process of cost allocation, not

22、 of market valuation. Q9-6 In a lump-sum purchase, the company allocates the total purchase price to the individual assets on the basis of their relative fair values. This allocation is necessary because some of the assets may have different economic lives, may not be depreciable, or may be deprec

23、iated by different methods. Q9-7 When a company exchanges securities for an asset, the acquisition cost of that asset is either the fair value of the securities given up or the fair value of the asset acquired. The company makes the choice on the basis of the market that is more reliable. If ne

24、ither of these amounts is known, it may use an appraisal of the asset, or, as a final solution, the company's board of directors may place a value on the transaction. Q9-8 The distinction between similar and dissimilar productive assets is that similar productive assets are of the same general ty

25、pe and perform the same basic function and are used in the same line of business. This distinction is made because, in the exchange of similar productive assets, the earning process is not considered completed, and thus the accounting for the transaction is different than when dissimilar productive

26、 assets are exchanged. Q9-9 When similar productive assets are exchanged, the company recognizes a gain to the extent that it receives "boot" along with the asset. The company recognizes a loss in accordance with the conservatism principle of accounting. When dissimilar productive assets are

27、exchanged, the earning process is considered completed and the company recognizes both gains and losses. Q9-10 The term "boot" refers to monetary consideration either paid or received. For the special rules to apply, the boot must be less than 25% of the fair value of the transaction. Q9-11 T

28、he general principle underlying accounting for dissimilar productive assets is that the earning process has been completed and thus gains or losses are recognized. On the other hand, in accounting for similar productive assets the earning process has not been completed. The company is in the same

29、relative position, so gains on the exchange is deferred (except to the extent that boot is received). Losses are recognized in accordance with the conservatism principle. Q9-12 According to the provisions of FASB Statement No. 34, a company capitalizes interest on the acquisition of an asset if

30、the asset requires a period of time to get it ready for its intended use - a criterion that is met for the self-construction of an asset. Specifically, the company does not capitalize interest for the following types of assets: 1. Inventories that are routinely manufactured or otherwise produced o

31、n a repetitive basis. 2. Assets that are in use or ready for their intended use. 3. Assets that are not being used in the earning activities of the company and are not undergoing the activities necessary to get them ready for use. Since imputed interest is not capitalized, the company must have b

32、orrowed funds to finance the self-construction of the asset. In contrast, interest on a note payable (that is not associated with the construction of an asset) is expensed as incurred. Q9-13 A company bases the amount of interest capitalized for a self-constructed asset on the actual amounts borro

33、wed and the cost of those borrowings. The amount is intended to be that portion of the interest cost incurred during the asset's construction period that theoretically could have been avoided. The company determines the amount that it capitalizes by applying an interest rate to the average amount

34、of the expenditures on the self-constructed asset during the capitalization period. Q9-14 Since activities that are necessary to get the asset ready for its intended use are in progress, the asset qualifies for interest capitalization. The company capitalizes interest to the building account unl

35、ess it makes specific expenditures that are normally added to the land account, as discussed at the beginning of this chapter. Q9-15 Three alternative treatments of fixed overhead costs are (1)?to allocate a portion of the total fixed overhead to the cost of the asset being constructed, (2) to in

36、clude only the incremental fixed overhead that is attributable to construction in the cost of the self-constructed asset, or (3) to include no fixed overhead in the cost of the self-constructed asset. Proponents of the allocation of total overhead argue that construction should be treated the same

37、as any other production process that receives a portion of overhead costs. This method is appropriate when the company is operating at full capacity and regular production is reduced by the self-construction. Arguments in favor of including only the incremental increase are that normal production

38、costs should include the same amount of overhead whether construction is going on or not, the normal overhead would be incurred anyway, and that the cost of an asset and the decision to construct it should be based on additional and incremental costs incurred. This method is appropriate when the co

39、mpany is in an excess capacity situation. The argument in favor of including no fixed overhead is that the fixed overhead does not change as a result of the construction. Therefore, to include some overhead would result in less overhead being expensed in the current period, and an increase in inco

40、me. Q9-16 Under generally accepted accounting principles, a company may not recognize profit on the self-construction of an asset. The revenue recognition principle allows recognition of profit on asset use and disposal, not on the acquisition or construction of an asset. If construction costs

41、are materially greater than the fair value of the asset, then the convention of conservatism requires the company to write-down the capitalized costs and recognize a loss. Q9-17 The distinction between a capital expenditure and an operating expenditure is whether the costs have increased the futu

42、re economic benefits of the asset above those that were originally expected. The future economic benefits can be increased by extending the life of the asset, improving productivity, producing the same product at a lower cost, or increasing the quality of the product. For example, if a machine rec

43、eives a major overhaul that increases the benefits to be realized from the asset, the costs are capitalized. Conversely, ordinary repairs are of a maintenance type that do not increase the total benefits to be realized, and, therefore, are expensed. As another example, the cost of adding a new win

44、g to an existing hospital is capitalized since it increases the total benefits of the hospital, whereas repairing the elevators does not increase the economic benefit of the hospital and so is expensed. Q9-18 An addition is a new asset that is being "added" or utilized in conjunction with an old

45、asset. In contrast, an improvement/ replacement involves the substitution of a new part or asset for an old one. In accounting for an addition, a company capitalizes the costs of the addition, and takes out of the old asset account any portion of the old asset that is demolished or removed. A com

46、pany capitalizes improvement and replacement costs using the substitution method when it knows the book value of the asset being replaced, by replacing the old book value with the cost of the new asset. If it does not know the old book value, then it still capitalizes the cost of the new asset, but

47、 with either a debit to the Accumulated Depreciation account of the old asset or a debit to the old Asset account. Q9-19 The costs of ordinary repairs and maintenance are expenses incurred routinely to keep the asset in operating condition. Since these costs do not increase the future benefits o

48、f the asset, a company expenses them as they are incurred. For interim financial reporting, the use of an Allowance account is appropriate in order to even out the expenses. However, this account is closed at the end of the year. Extraordinary repairs are those that cannot be foreseen and do not

49、occur in the usual course of operations, such as emergency repairs to a machine that breaks down during production. Usually, a company expenses these costs, but care should be taken to note whether these repairs increase the future benefits of the asset. If they do, then the company capitalizes th

50、e costs. Q9-20 Leasehold improvements are improvements made to leased property that, upon termination of the lease, will revert back to the lessor. A company capitalizes the cost of these improvements and subsequently amortizes them over the economic life of the improvements or the lease term, w

51、hichever is shorter. Q9-21 An Allowance for Repairs account appears only on balance sheets of interim financial statements if a company incurs repair costs unevenly. At year-end, this account is closed; thus, it does not appear on a year-end balance sheet. Q9-22 A company accounts for the dis

52、posal of an asset by removing both the asset and accumulated depreciation to date from the ledger, recording the receipt of cash, if any, and also recording any gain or loss. It reports this gain or loss in ordinary income (in the category of Other Items) on the income statement unless it meets the

53、 criteria for an extraordinary item. Q9-23 Under the successful-efforts method of accounting for oil and gas properties, a company capitalizes only those costs incurred in drilling for successful wells while it expenses the costs of unsuccessful wells. In contrast, under the full-costing method

54、a company capitalizes all costs of drilling wells, whether the drilling was successful or not. ANSWERS TO CASES C9-1 (AICPA adapted solution) 1. The expenditures that are capitalized when equipment is acquired for cash include the invoice price of the equipment (net of discounts) plus

55、all incidental outlays relating to its purchase or preparation for use, such as insurance during transit, freight, duties, ownership search, ownership registration, installation, and breaking-in costs. Any available discounts, whether taken or not, should be deducted from the capitalizable cost of

56、the equipment. 2. a. When the market value of the equipment is not determinable by reference to a similar cash purchase, the capitalizable cost of equipment purchased with bonds having an established market price is the market value of the bonds. b. When the market value of the equipment is no

57、t determinable by reference to a similar cash purchase, and the common stock used in the exchange does not have an established market price, the capitalizable cost of equipment is the equipment's estimated fair value if that is more clearly evident that the fair value of the common stock. Independe

58、nt appraisals may be used to determine the fair values of the assets involved. c. When the market value of equipment acquired is not determinable by reference to a similar cash purchase, the capitalizable cost of equipment purchased by exchanging similar equipment having a determinable market val

59、ue is the lower of the recorded amount of the equipment relinquished or the market value of the equipment exchanged. 3. The factors that determine whether expenditures relating to property, plant, and equipment already in use are capitalized are as follows: · Expenditures are relatively large

60、in amount. · They are nonrecurring in nature. · They extend the useful life of the property, plant, and equipment. · They increase the usefulness of the property, plant, and equipment. 4. The net book value at the date of the sale (cost of the property, plant, and equipment less the accu

61、mulated depreciation) is removed from the accounts. The excess of cash from the sale over the net book value removed is accounted for as a gain on the sale, while the excess of net book value removed over cash from the sale is accounted for as a loss on the sale. C9-2 (AICPA adapted solution)

62、 1. Expenditures are capitalized when they benefit future periods. The cost to acquire the land is capitalized and classified as land, a nondepreciable asset. Since tearing down the small factory is readying the land for its intended use, its cost is part of the cost of the land and is capitalize

63、d and classified as land. As a result, this cost is not depreciated as it would be if it was classified with the capitalizable cost of the building. C9-2 (continued) 1. (continued) Since the rock blasting and removal is required for the specific purpose of erecting the building, its cost

64、 is part of the cost of the building and is capitalized and classified with the capitalizable cost of the building. This cost is depreciated over the estimated useful life of the building. The road is a land improvement, and its cost is capitalized and classified separately as a land improvement

65、. This cost is depreciated over its estimated useful life. The added four stories is an addition, and its cost is capitalized and classified with the capitalizable cost of the building. This cost is depreciated over the remaining life of the original office building because that life is shorter

66、 than the estimated useful life of the addition. 2. The gain is recognized on the sale of the land and building because income is realized whenever the earning process is complete and the sale takes place. The book value at the date of the sale is composed of the capitalized cost of the land, the land improvement, and the building, as determined above, less the accumulated depreciation on the land improvement and the building. The excess of the proceeds received from the sale over the net