f7 f7 f7 f7
SOLUTIONSf7MANUAL
tof7accompany
Fundamental Accounting Principles, Volume 2
f7 f7 f7 f7
15thCanadianf7Edition
byf7Larson/Jensen/Dieckmann
Preparedf7by:
Lauraf7Dallas,f7Kwantlenf7Polytechnicf7University
Technicalf7checksf7by:
Elizabethf7Hicks,f7Douglasf7College
f7Michellef7Young,f7CPA
f7 f7 f7 f7 f7 f7 f7 f7 f7 f7 f7 f7
f7 f7
, f7 f7 f7 f7
Chapterf79 Property,f7Plantf7andf7Equipmentf7andf7Intangibles
Chapterf7Openingf7Criticalf7Thinkingf7Challengef7Questions*
Youf7aref7askedf7byf7thef7CFOf7off7YVRf7tof7evaluatef7thef7newestf7capitalf7asset,f7thef7Airside
f7Operationsf7Buildingf7atf7YVR,f7andf7tof7breakf7itf7intof7majorf7componentsf7forf7depreciati
onf7purposes.f7Identifyf7atf7leastf7fivef7majorf7componentsf7andf7determinef7anf7expectedf7lif
ef7forf7eachf7off7thosef7components.
Componentsf7off7thef7Airsidef7Operationsf7Buildingf7couldf7include:
1. Buildingf7exteriorf7walls 40f7years
2. Roofing 25f7years
3. Pavement 15f7years
4. Landscaping 10f7years
5. Electricalf7Components 15f7years
6. Flooring 15f7years
7. Plumbing 15f7years
8. Furnituref7andf7Fixtures 15f7years
9. Firef7Equipment 20f7years
10. Snowf7Removalf7Equipment 20f7years
*Thef7Chapterf79f7Criticalf7Thinkingf7Challengef7questionsf7aref7askedf7atf7thef7beginningf7o
ff7thisf7chapter.f 7 Studentsf7aref7remindedf7atf7thef7conclusionf7off7thef7chapterf7tof7referf7t
of7thef7Criticalf7Thinkingf7Challengef7questionsf7atf7thef7beginningf7off7thef7chapter.f 7 Thef7
solutionsf7tof7thef7Criticalf7Thinkingf7Challengef7questionsf7aref7availablef7heref7inf7thef7S
olutionsf7Manualf7andf7accessiblef7tof7studentsf7atf7Connect.
f7 f7 f7 f7 f7 f7 f7 f7 f7 f7 f7 f7
f7 f7
, f7 f7 f7 f7
Conceptf7Reviewf7Questions
1. Af7property,f7plantf7andf7equipmentf7assetf7isf7long-
livedf7inf7thatf7itf7hasf7af7servicef7lifef7off7longerf7thanf7onef7accountingf7period;f7itf7isf7use
df7inf7thef7productionf7orf7salef7off7productsf7orf7services.f 7 Itf7isf7differentf7fromf7otherf7as
setsf7suchf7asf7receivablesf7orf7inventoryf7inf7thatf7thef7property,f7plantf7andf7equipmentf7i
sf7usedf7withinf7thef7operationsf7off7businessf7tof7generatef7profit,f7whereasf7inventoryf7isf
7purchasedf7orf7manufacturedf7forf7resale.f 7 Receivablesf7representf7thef7amountsf7duef7f
romf7customersf7basedf7onf7pastf7transactions.
2. Landf7heldf7forf7futuref7expansionf7isf7classifiedf7asf7af7long-
termf7investment.f7Itf7isf7notf7af7property,f7plantf7andf7equipmentf7assetf7becausef7itf7isf7n
otf7beingf7usedf7inf7thef7productionf7orf7salef7off7otherf7assetsf7orf7services.
3. Thef7costf7off7af7property,f7plantf7andf7equipmentf7assetf7includesf7allf7normal,f7reasonabl
e,f7andf7necessaryf7costsf7off7gettingf7thef7assetf7inf7placef7andf7readyf7tof7use.f7Forf7exa
mple,f7costf7includesf7suchf7itemsf7asf7thef7invoicef7pricef7paid,f7freightf7costs,f7nonf7refu
ndablef7salesf7taxesf7(PST,f7HST)f7andf7allf7costsf7incurredf7relatedf7tof7installingf7andf7tes
tingf7anf7assetf7beforef7itf7isf7putf7intof7use.
4. Landf7isf7anf7assetf7withf7anf7unlimitedf7lifef7and,f7therefore,f7isf7notf7subjectf7tof7depreciat
ion.f 7 Landf7improvementsf7referf7tof7itemsf7suchf7asf7fencing,f7parkingf7lotsf7surfaces,f7l
andscapef7lightingf7andf7havef7limitedf7livesf7andf7aref7depreciatedf7overf7theirf7usefulf7liv
es.
5. No.f 7 Thef7Accumulatedf7Depreciation,f7Machineryf7accountf7isf7af7contraf7assetf7accountf
7withf7af7creditf7balancef7thatf7doesf7notf7representf7cashf7orf7anyf7otherf7funds.f 7 Fundsf7a
vailablef7forf7buyingf7machineryf7wouldf7bef7shownf7onf7thef7balancef7sheetf7asf7liquidf7as
setsf7withf7debitf7balances,f7suchf7asf7thef7accountf7Cashf7andf7Cashf7Equivalents.f 7 Thef7
balancef7off7thef7Accumulatedf7Depreciation,f7Machineryf7accountf7showsf7thef7portionf7o
ff7thef7machinery'sf7originalf7costf7thatf7hasf7beenf7chargedf7tof7depreciationf7expense,f7a
ndf7givesf7somef7indicationf7off7howf7soonf7thef7assetf7willf7needf7tof7bef7replaced.
6. Revenuef7expenditures,f7suchf7asf7repairs,f7aref7madef7tof7keepf7af7plantf7andf7equipmentf
7assetf7inf7normal,f7goodf7operatingf7condition,f7andf7shouldf7bef7chargedf7tof7expensef7of
f7thef7currentf7period.f 7 Capitalf7expendituresf7aref7madef7tof7extendf7thef7servicef7potenti
alf7orf7thef7lifef7off7af7plantf7andf7equipmentf7assetf7beyondf7thef7originalf7estimatedf7lifef7a
ndf7aref7chargedf7tof7thef 7 plantf7andf7equipmentf7assetf7account.f 7 Afterf7incurringf7af7ca
pitalf7expenditure,f7af7depreciationf7policyf7alsof7needsf7tof7bef7established.f77.f 7 Becausef
7thef7$75f7costf7off7thef7plantf7andf7equipmentf7assetf7isf7notf7likelyf7tof7bef7materialf7tof7th
ef7usersf7off7thef7financialf7statements,f7thef7materialityf7principlef7justifiesf7chargingf7itf7t
of7expense.
8. Danierf7Leatherf7didf7notf7reportf7anyf7gainsf7orf7lossesf7onf7disposalf7off7assetsf7forf7itsf7y
earf7endedf7Junef728,f72014.f7However,f7thef7corporationf7didf7havef7anf7Impairmentf7lossf7
onf7propertyf7andf7equipmentf7off7$663,000.
9. Af7companyf7mightf7sellf7orf7exchangef7anf7assetf7whenf7itf7reachesf7thef7endf7off7itsf7usef
ulf7life,f7orf 7 iff7itf7becomesf7inadequatef7orf7obsolete,f7orf7becausef7thef7companyf7hasf7ch
angedf7itsf7businessf7plans.f 7 Anf7assetf7mayf7alsof7bef7damagedf7orf7destroyedf7byf7firef7
orf7somef7otherf7accident.
10. Anf7intangiblef7assetf7hasf7nof7physicalf7existence.f 7 Itsf7valuef7comesf7fromf7thef7uniquef
7legalf 7 andf7contractualf7rightsf7heldf7byf7itsf7owner.
f7 f7 f7 f7 f7 f7 f7 f7 f7 f7 f7 f7
f7 f7
, f7 f7 f7 f7
11. Typesf7off7intangiblef7assetsf7aref7patents,f7copyrights,f7leaseholds,f7drillingf7right
s,f7andf7trademarks.
12. WestJetf7reportedf7$60,623,000f7asf7Intangiblef7assetsf7atf7Decemberf731,f72014.
13. Af7businessf7canf7onlyf7recordf7goodwillf7whenf7thef7pricef7paidf7forf7af7companyf7beingf7p
urchasedf7exceedsf7thef7fairf7marketf7valuef7off7thisf7company’sf7netf7assetsf7(assetsf7min
usf7liabilities)f7iff7purchasedf7separately.
14. Westjetf7didf7notf7reportf7anyf7Goodwillf7atf7Decemberf731,f72014.
15. Whenf7anf7assetf7isf7constructed,f7suchf7asf7thef7developmentf7off7af7newf7runway,f7allf7co
stsf7forf7construction-
relatedf7materialsf7andf7labourf7costsf7canf7bef7capitalized.f 7 Alsof7anyf7electricityf7andf7uti
litiesf7consumedf7relatingf7tof7thef7project,f7plusf7af7reasonablef7amountf7forf7depreciation
f7onf7anyf7equipmentf7usedf7duringf7construction.f 7 Otherf7permittedf7costsf7includef7desi
gnf7fees,f7buildingf7materialsf7andf7anyf7interestf7chargesf7onf7debtf7outstandingf7duringf7t
hef7periodf7off7constructionf7incurredf7tof7financef7thef7project.
f7 f7 f7 f7 f7 f7 f7 f7 f7 f7 f7 f7
f7 f7
SOLUTIONSf7MANUAL
tof7accompany
Fundamental Accounting Principles, Volume 2
f7 f7 f7 f7
15thCanadianf7Edition
byf7Larson/Jensen/Dieckmann
Preparedf7by:
Lauraf7Dallas,f7Kwantlenf7Polytechnicf7University
Technicalf7checksf7by:
Elizabethf7Hicks,f7Douglasf7College
f7Michellef7Young,f7CPA
f7 f7 f7 f7 f7 f7 f7 f7 f7 f7 f7 f7
f7 f7
, f7 f7 f7 f7
Chapterf79 Property,f7Plantf7andf7Equipmentf7andf7Intangibles
Chapterf7Openingf7Criticalf7Thinkingf7Challengef7Questions*
Youf7aref7askedf7byf7thef7CFOf7off7YVRf7tof7evaluatef7thef7newestf7capitalf7asset,f7thef7Airside
f7Operationsf7Buildingf7atf7YVR,f7andf7tof7breakf7itf7intof7majorf7componentsf7forf7depreciati
onf7purposes.f7Identifyf7atf7leastf7fivef7majorf7componentsf7andf7determinef7anf7expectedf7lif
ef7forf7eachf7off7thosef7components.
Componentsf7off7thef7Airsidef7Operationsf7Buildingf7couldf7include:
1. Buildingf7exteriorf7walls 40f7years
2. Roofing 25f7years
3. Pavement 15f7years
4. Landscaping 10f7years
5. Electricalf7Components 15f7years
6. Flooring 15f7years
7. Plumbing 15f7years
8. Furnituref7andf7Fixtures 15f7years
9. Firef7Equipment 20f7years
10. Snowf7Removalf7Equipment 20f7years
*Thef7Chapterf79f7Criticalf7Thinkingf7Challengef7questionsf7aref7askedf7atf7thef7beginningf7o
ff7thisf7chapter.f 7 Studentsf7aref7remindedf7atf7thef7conclusionf7off7thef7chapterf7tof7referf7t
of7thef7Criticalf7Thinkingf7Challengef7questionsf7atf7thef7beginningf7off7thef7chapter.f 7 Thef7
solutionsf7tof7thef7Criticalf7Thinkingf7Challengef7questionsf7aref7availablef7heref7inf7thef7S
olutionsf7Manualf7andf7accessiblef7tof7studentsf7atf7Connect.
f7 f7 f7 f7 f7 f7 f7 f7 f7 f7 f7 f7
f7 f7
, f7 f7 f7 f7
Conceptf7Reviewf7Questions
1. Af7property,f7plantf7andf7equipmentf7assetf7isf7long-
livedf7inf7thatf7itf7hasf7af7servicef7lifef7off7longerf7thanf7onef7accountingf7period;f7itf7isf7use
df7inf7thef7productionf7orf7salef7off7productsf7orf7services.f 7 Itf7isf7differentf7fromf7otherf7as
setsf7suchf7asf7receivablesf7orf7inventoryf7inf7thatf7thef7property,f7plantf7andf7equipmentf7i
sf7usedf7withinf7thef7operationsf7off7businessf7tof7generatef7profit,f7whereasf7inventoryf7isf
7purchasedf7orf7manufacturedf7forf7resale.f 7 Receivablesf7representf7thef7amountsf7duef7f
romf7customersf7basedf7onf7pastf7transactions.
2. Landf7heldf7forf7futuref7expansionf7isf7classifiedf7asf7af7long-
termf7investment.f7Itf7isf7notf7af7property,f7plantf7andf7equipmentf7assetf7becausef7itf7isf7n
otf7beingf7usedf7inf7thef7productionf7orf7salef7off7otherf7assetsf7orf7services.
3. Thef7costf7off7af7property,f7plantf7andf7equipmentf7assetf7includesf7allf7normal,f7reasonabl
e,f7andf7necessaryf7costsf7off7gettingf7thef7assetf7inf7placef7andf7readyf7tof7use.f7Forf7exa
mple,f7costf7includesf7suchf7itemsf7asf7thef7invoicef7pricef7paid,f7freightf7costs,f7nonf7refu
ndablef7salesf7taxesf7(PST,f7HST)f7andf7allf7costsf7incurredf7relatedf7tof7installingf7andf7tes
tingf7anf7assetf7beforef7itf7isf7putf7intof7use.
4. Landf7isf7anf7assetf7withf7anf7unlimitedf7lifef7and,f7therefore,f7isf7notf7subjectf7tof7depreciat
ion.f 7 Landf7improvementsf7referf7tof7itemsf7suchf7asf7fencing,f7parkingf7lotsf7surfaces,f7l
andscapef7lightingf7andf7havef7limitedf7livesf7andf7aref7depreciatedf7overf7theirf7usefulf7liv
es.
5. No.f 7 Thef7Accumulatedf7Depreciation,f7Machineryf7accountf7isf7af7contraf7assetf7accountf
7withf7af7creditf7balancef7thatf7doesf7notf7representf7cashf7orf7anyf7otherf7funds.f 7 Fundsf7a
vailablef7forf7buyingf7machineryf7wouldf7bef7shownf7onf7thef7balancef7sheetf7asf7liquidf7as
setsf7withf7debitf7balances,f7suchf7asf7thef7accountf7Cashf7andf7Cashf7Equivalents.f 7 Thef7
balancef7off7thef7Accumulatedf7Depreciation,f7Machineryf7accountf7showsf7thef7portionf7o
ff7thef7machinery'sf7originalf7costf7thatf7hasf7beenf7chargedf7tof7depreciationf7expense,f7a
ndf7givesf7somef7indicationf7off7howf7soonf7thef7assetf7willf7needf7tof7bef7replaced.
6. Revenuef7expenditures,f7suchf7asf7repairs,f7aref7madef7tof7keepf7af7plantf7andf7equipmentf
7assetf7inf7normal,f7goodf7operatingf7condition,f7andf7shouldf7bef7chargedf7tof7expensef7of
f7thef7currentf7period.f 7 Capitalf7expendituresf7aref7madef7tof7extendf7thef7servicef7potenti
alf7orf7thef7lifef7off7af7plantf7andf7equipmentf7assetf7beyondf7thef7originalf7estimatedf7lifef7a
ndf7aref7chargedf7tof7thef 7 plantf7andf7equipmentf7assetf7account.f 7 Afterf7incurringf7af7ca
pitalf7expenditure,f7af7depreciationf7policyf7alsof7needsf7tof7bef7established.f77.f 7 Becausef
7thef7$75f7costf7off7thef7plantf7andf7equipmentf7assetf7isf7notf7likelyf7tof7bef7materialf7tof7th
ef7usersf7off7thef7financialf7statements,f7thef7materialityf7principlef7justifiesf7chargingf7itf7t
of7expense.
8. Danierf7Leatherf7didf7notf7reportf7anyf7gainsf7orf7lossesf7onf7disposalf7off7assetsf7forf7itsf7y
earf7endedf7Junef728,f72014.f7However,f7thef7corporationf7didf7havef7anf7Impairmentf7lossf7
onf7propertyf7andf7equipmentf7off7$663,000.
9. Af7companyf7mightf7sellf7orf7exchangef7anf7assetf7whenf7itf7reachesf7thef7endf7off7itsf7usef
ulf7life,f7orf 7 iff7itf7becomesf7inadequatef7orf7obsolete,f7orf7becausef7thef7companyf7hasf7ch
angedf7itsf7businessf7plans.f 7 Anf7assetf7mayf7alsof7bef7damagedf7orf7destroyedf7byf7firef7
orf7somef7otherf7accident.
10. Anf7intangiblef7assetf7hasf7nof7physicalf7existence.f 7 Itsf7valuef7comesf7fromf7thef7uniquef
7legalf 7 andf7contractualf7rightsf7heldf7byf7itsf7owner.
f7 f7 f7 f7 f7 f7 f7 f7 f7 f7 f7 f7
f7 f7
, f7 f7 f7 f7
11. Typesf7off7intangiblef7assetsf7aref7patents,f7copyrights,f7leaseholds,f7drillingf7right
s,f7andf7trademarks.
12. WestJetf7reportedf7$60,623,000f7asf7Intangiblef7assetsf7atf7Decemberf731,f72014.
13. Af7businessf7canf7onlyf7recordf7goodwillf7whenf7thef7pricef7paidf7forf7af7companyf7beingf7p
urchasedf7exceedsf7thef7fairf7marketf7valuef7off7thisf7company’sf7netf7assetsf7(assetsf7min
usf7liabilities)f7iff7purchasedf7separately.
14. Westjetf7didf7notf7reportf7anyf7Goodwillf7atf7Decemberf731,f72014.
15. Whenf7anf7assetf7isf7constructed,f7suchf7asf7thef7developmentf7off7af7newf7runway,f7allf7co
stsf7forf7construction-
relatedf7materialsf7andf7labourf7costsf7canf7bef7capitalized.f 7 Alsof7anyf7electricityf7andf7uti
litiesf7consumedf7relatingf7tof7thef7project,f7plusf7af7reasonablef7amountf7forf7depreciation
f7onf7anyf7equipmentf7usedf7duringf7construction.f 7 Otherf7permittedf7costsf7includef7desi
gnf7fees,f7buildingf7materialsf7andf7anyf7interestf7chargesf7onf7debtf7outstandingf7duringf7t
hef7periodf7off7constructionf7incurredf7tof7financef7thef7project.
f7 f7 f7 f7 f7 f7 f7 f7 f7 f7 f7 f7
f7 f7
