Selected accounts included in the property, plant, and equipment section of Flipper Corporation's...
Question:
Selected accounts included in the property, plant, and equipment section of Flipper Corporation's balance sheet at December 31, 2014, had the following balances:
| Land | $400,000 |
| Land improvements | 130,000 |
| Buildings | 2,000,000 |
| Machinery and equipment | 800,000 |
During 2015, the following transactions occurred:
a. On January 31 a tract of land was acquired for $220,000 as a potential future building site from Flopper Corp.
b. On March 1 a plant facility consisting of land and building was acquired from Flimsy Company in exchange for 20,000 shares of Flipper's common stock. On the acquisition date, Flipper's stock had a closing market price of $45 per share on a national stock exchange. The plan facility was carried on Flimsy's books at $178,000 for land and $520,000 for the building at the exchange date. Current appraised values for the land and the building, respectively, are $200,000 and $800,000. The building has an expected life of forty years with a $20,000 salvage value.
c. On June 1 machinery and equipment were purchased from Guess Who Equipment at a total cost of $400,000. Additional costs were incurred as follows: freight and unloading, $13,000; installation, $26,000. The equipment has a useful life of ten years with no salvage value.
d. On August 1 expenditures totaling $120,000 were made for new parking lots, street, and sidewalks at the corporation's various plant locations. These expenditures had an estimated useful life of fifteen years.
e. On September 1 research and development costs of $110,000 were paid for the year.
Flipper uses the double-declining balance method of depreciation for all office equipment, fixtures and machinery. Additionally, Flipper uses the straight-line method of depreciation for all other fixed assets that require depreciation or amortization.
Provide the capitalized cost & depreciation or amortization for each asset acquired during 2015. Prepare the General journal entries for any amortization and depreciation expense recorded for each of the acquired items in 2015. If no entry is necessary, write "no entry".
Cost of Property, Plant, and Equipment:
The amount recognized and the initial cost of a property, plant or equipment item must include its purchase price and all costs incurred to get the item ready for its intended use. After the initial recognition, items with limited useful lives must be amortized.
Answer and Explanation: 1
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Calculating the Capitalized Cost:
Recall that:
- An asset acquired through the issuing of common stock is recognized at the fair value of the stock...
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Chapter 9 / Lesson 4One of the main categories of long-term assets is known as property, plant, and equipment, encompassing the location, buildings, and equipment needed in production. Learn how the acquisition of property, plant, and equipment is recorded and documented through an example of journaling.