Rivers is the auditor for a manufacturing company with a balance sheet that includes the caption "Property, Plant, and Equipment." Management has asked Rivers if audit adjustments or reclassifications are required for the following material items that have been included or excluded from "Property, Plant, and Equipment."

a. A tract of land was acquired during the year. The land is the future site of the client's new headquarters which will be constructed the following year. Commissions were paid to the real estate agent used to acquire the land, and expenditures were made to relocate the previous owner's equipment. The commissions and expenditures were expensed and are excluded from "Property, Plant, and Equipment."

b. Clearing costs were incurred to make the land ready for construction. The costs were included in "Property, Plant, and Equipment."

c. During the land clearing process, timber and gravel were recovered and sold. The proceeds from the sale were recorded as other income and are excluded from "Property, Plant, and Equipment."

d. A group of machines was purchased under a royalty agreement that provides royalty payments based on units of production from the machines. The cost of the machines, freight costs, unloading charges, and royalty payments were capitalized and are included in "Property, Plant, and Equipment."

Required:

1. Describe the general characteristics of assets, such as land, buildings, improvements, machinery, equipment, fixtures, etc., that should normally be classified as property, plant, and equipment, and identify audit objectives in connection with the audit of "Property, Plant, and Equipment."

2. Indicate whether each of the items (a) to (d) requires one or more audit adjustments or reclassifications, and explain why adjustments or reclassifications are required or not required.
Organize your answer as follows:

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Item Number Is Audit Adjustment or Reclassification Required? Yes or No Reason Why Adjustment or Reclassification Is Required or Not Required