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ACQUISITION AND DISPOSITION OF PROPERTY, PLANT, AND
EQUIPMENT
IFRS questions are available at the end of this chapter.
TRUE-FALSE—Conceptual
1. Assets classified as Property, Plant, and Equipment can be
either acquired for use in operations, or acquired for resale.
2. Assets classified as Property, Plant, and Equipment must be
both long-term in nature and possess physical substance.
3. When land with an old building is purchased as a future
building site, the cost of removing the old building is part of the cost
of the new building.
4. Insurance on equipment purchased, while the equipment is in
transit, is part of the cost of the equipment.
5. Special assessments for local improvements such as street
lights and sewers should be accounted for as land improvements.
6. Variable overhead costs incurred to self-construct an asset
should be included in the cost of the asset.
7. Companies should assign no portion of fixed overhead to self-
constructed assets.
8. When capitalizing interest during construction of an asset, an
imputed interest cost on stock financing must be included.
9. Assets under construction for a company’s own use do not
qualify for interest cost capitalization.