Carr Company must determine whether the following items are included in property, plant, and equipment:
a. contract price
b. list price c. freight costs
d. discounts taken
e. discounts not taken
f. installation costs
g. testing costs
h. cost of major overhaul of equipment
i. costs of grading land prior to construction
j. tax assessment for street improvements
k. delinquent property taxes on acquired property
l. cost of tearing down an old building (already owned) in preparation for new construction
m. cost of insurance during construction
n. avoidable interest costs during construction
o. landscaping costs
p. severance pay for employees dismissed because of the acquisition of a new machine
q. cost of tearing down a building on newly acquired land
r. replacement of an electric motor in a machine
s. expansion of the heating/cooling system to accommodate an expansion of a building and certain expected future needs
t. purchase price of a service contract for 2 years on the acquired asset
u. cost of training new employees
Required:
1. Indicate which items are included in the cost of property, plant, and equipment and which items are excluded from the cost of property, plant, and equipment.
2. Next Level What is the general rule that should be followed in determining which costs are included in property, plant, and equipment?