Resources

The Cost of Machinery or Equipment

The cost of machinery or equipment includes the purchase price after deducting trade discounts and rebates, transportation charges incurred, insurance while in transit, installation cost, accessories, and testing costs to prepare it for use.

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Posted by: glomont on October 3, 2021 in FAR, Resources

The Cost of Building

QuestionQuestion ID: 42307FAR2019UPine Co. purchased land for $450,000 as a factory site. An existing building on the site was razed before construction began. Additional information is as follows:Cost of razing old building$60,000Title insurance and legal fees to purchase land30,000Architect’s fees95,000New building construction cost1,850,000What amount should Pine capitalize as the cost of the completed factory building?a. […]

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Posted by: glomont on October 3, 2021 in FAR, Resources

The Cost of Land

QuestionQuestion ID: STFAR2021On April 1, West Co. purchased a tract of land as a factory site for $500,000. An old building on the site was razed, and materials salvaged from the demolition were sold. Additional costs incurred and salvage proceeds realized during April were as follows:DescriptionAmountCosts to raze old building$60,000Legal fees for purchase contract and […]

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Posted by: glomont on October 3, 2021 in FAR, Resources

Interest Capitalization

QuestionQuestion ID: 54295FAR2014HAn entity purchased new machinery from a supplier before the entity’s year end. The entity paid freight charges for the purchased machinery. The entity took out a loan from a bank to finance the purchase. What is the proper accounting treatment for the freight and interest costs related to the machinery purchase?a. The […]

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Posted by: glomont on March 19, 2021 in FAR, Resources