Question

Question: Name the items, in addition to the amount paid to the former owner or contractor, that may properly be included as part of the acquisition cost of the following plant assets. (a) Land. (b) Machinery and equipment. (c) Buildings

Short answer

Answer

1. Land: purchase price, closing cost, improvement cost and other cost
2. Equipment: Purchase price, installation, insurance, handling cost and freight.
3. Building cost: Material, labor, overhead and professional fees.

Step-by-step solution

Acquisition cost of Land

Land includes the following costs:

1. Purchase price of the land paid by the company.
2. Closing cost like recoding cost, fees paid to attorney.
3. Cost incurred by the company to made the land ready for use.
4. Cost incurred on improvement of land.

Acquisition cost of machinery and equipment

Machinery and equipment include the following costs:

1. Price paid to purchase the machinery and equipment.
2. Cost incurred on the freight.
3. Cost incurred on the insurance of the machinery and equipment in transit.
4. Handling and installation cost of machinery and equipment.

Acquisition cost of Building

Buildings include the following costs:

1. Construction cost of building which include the material, labor and overhead.
2. Cost incurred on permits and pro