Intermediate Accounting
1st Edition
ISBN: 9780132162302
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Chapter 11, Problem 1JC
Judgment Case 1: Property, Plant, and Equipment: Initial Measurement
Bookstores International, a bookstore chain, has been quite successful over the past few decades and is now in expansion mode it typically approaches opening a new bookstore by first determining the general geographic location for a new store and then identifying three to five possible locations within the broader geographic selection. It then hires two consultants: One consultant performs feasibility studies on the three to five locations, and the other consultant develops detailed building plans including an assessment of potential building costs for each of the selected sites. Because the plans for the various sites are not completely independent of each other, the consultant simply charges one fee for the plans for an entire geographic location selection. Based upon the results of the feasibility studies and the predicted building costs, the management of Bookstores International then selects a site and begins the construction process.
Should the fees paid to the consultants be capitalized as part of the new building or should they be expensed? Support your determination with research at ASC 360-10-30 (Property, Plant, and Equipment – Overall-Initial Measurement) and ASC 720-15 (Other Expenses - Start-Up Costs)
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Chapter 11 Solutions
Intermediate Accounting
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