Jay Manufacturing, Inc., began operations five years ago producing probos, a new medical instrument it hoped to
Question:
Required:
a. In addition to satisfying a need that outsiders could not meet within the desired time, why might a company self-construct fixed assets for its own use?
b. Generally, what costs should a company capitalize for a self-constructed fixed asset?
c. Discuss the propriety of including in the capitalized cost of self-constructed assets:
(1) The increase in overhead caused by the self-construction of fixed assets.
(2) A proportionate share of overhead on the same basis as that applied to goods manufactured for sale.
d. Discuss the accounting treatment for the $90,000 amount ($170,000 – $80,000) by which the cost of the first machine exceeded the cost of subsequent machines.
(AICPA Adapted)
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Related Book For
Financial Statement Analysis
ISBN: 978-0078110962
11th edition
Authors: K. R. Subramanyam, John Wild
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