12 Jul EXPLAIN THE APPLICATION OF THE COST PRINCIPLE IN DETERMINING THE ACQUISITION COST OF PLANT ASSETS.
The following expenditures relating to plant assets were made by Spaulding Company during the first 2 months of 2011. 1. Paid $5,000 of accrued taxes at time plant site was acquired. 2. Paid $200 insurance to cover possible accident loss on new factory machinery while the machinery was in transit. 3. Paid $850 sales taxes on new delivery truck. 4. Paid $17,500 for parking lots and driveways on new plant site. 5. Paid $250 to have company name and advertising slogan painted on new delivery truck. 6. Paid $8,000 for installation of new factory machinery. 7. Paid $900 for one-year accident insurance policy on new delivery truck. 8. Paid $75 motor vehicle license fee on the new truck. Instructions (a) Explain the application of the cost principle in determining the acquisition cost of plant assets. (b) List the numbers of the foregoing transactions, and opposite each indicate the account title to which each expenditure should be debited. (c) Research and development costs 1. ______ Rights, privileges, and competitive advantages that result from the ownership of longlived assets that do not possess physical substance. 2. ______ The allocation of the cost of an intangible asset to expense in a rational and systematic manner. 3. ______ A right to sell certain products or services, or use certain trademarks or trade names within a designated geographic area. 4. ______ Costs incurred by a company that often lead to patents or new products.These costs must be expensed as incurred. 5. ______ The excess of the cost of a company over the fair market value of the net assets acquired.
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