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, TABLE OF CONTENTS
Solutions Manual: Fundamental Accounting Principles, Volume 2,
18th Canadian Edition
Authors: Kermit Larson, Heidi Dieckmann, John Harris, Erin Creagh
ST
Chapter 9. Property, Plant, and Equipment and Intangibles
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Chapter 10. Current Liabilities
Chapter 11. Partnerships
Chapter 12. Organization and Operation of Corporations
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Chapter 13. Corporate Reporting: Profit, Earnings Per Share, and Retained Earnings
Chapter 14. Bonds and Long-Term Notes Payable
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Chapter 15. Accounting for Debt and Share Investments
Chapter 16. Reporting and Analyzing Cash Flows
Chapter 18. Analyzing Financial Statements
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, Last revised: December 2023
Chapter 9 Property, Plant and Equipment and Intangibles
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Concept Review Questions
1. A property, plant and equipment asset is long-lived in that it has a service life of longer than
one accounting period; it is used in the production or sale of products or services. It is
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different from other assets such as receivables or inventory in that the property, plant and
equipment is used within the operations of business to generate profit, whereas inventory
is purchased or manufactured for resale. Receivables represent the amounts due from
customers based on past transactions.
2. Land held for future expansion is classified as a long-term investment. It is not a property,
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plant and equipment asset because it is not being used in the production or sale of other
assets or services.
3. The cost of a property, plant and equipment asset includes all normal, reasonable, and
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necessary costs of getting the asset in place and ready to use. For example, cost includes
such items as the invoice price paid, freight costs, non refundable sales taxes (PST, HST)
and all costs incurred related to installing and testing an asset before it is put into use.
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4. Land is an asset with an unlimited life and, therefore, is not subject to depreciation. Land
improvements refer to items such as fencing, parking lots surfaces, landscape lighting and
have limited lives and are depreciated over their useful lives.
5. No. The Accumulated Depreciation, Machinery account is a contra asset account with a
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credit balance that does not represent cash or any other funds. Funds available for buying
machinery would be shown on the balance sheet as liquid assets with debit balances, such
as the account Cash and Cash Equivalents. The balance of the Accumulated Depreciation,
Machinery account shows the portion of the machinery's original cost that has been
charged to depreciation expense, and gives some indication of how soon the asset will
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need to be replaced.
6. Repairs are made to keep a plant and equipment asset in normal, good operating
condition, and should be charged to expense of the current period. Repairs and
maintenance expenses decrease profit on the income statement in the current period.
Betterments are made to extend the service potential or the life of a plant and equipment
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asset beyond the original estimated life and are charged to the plant and equipment asset
account. After incurring a betterment, a depreciation policy also needs to be established.
7. Because the $75 cost of the plant and equipment asset is not likely to be material to the
users of the financial statements, the materiality principle justifies charging it to expense.
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8. Spin Master had Depreciation and amortization of 68.2 and 111.9 (millions) in 2022 and
2021 as seen on the Consolidated statements of Cash flows. More information about this
change can be found in the notes.
9. A company might sell or exchange an asset when it reaches the end of its useful life, or if it
becomes inadequate or obsolete, or because the company has changed its business plans.
An asset may also be damaged or destroyed by fire or some other accident.
, Last revised: December 2023
10. An intangible asset has no physical existence. Its value comes from the unique legal and
contractual rights held by its owner.
11. Types of intangible assets are patents, copyrights, leaseholds, drilling rights, and
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trademarks.
12. Gildan reported $229,951,000 as Intangible assets at January 1, 2023. Gildan reported
Goodwill at January 1, 2023 of $271,677,000.
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13. A business can only record goodwill when the price paid for a company being purchased
exceeds the fair market value of this company’s net assets (assets minus liabilities) if
purchased separately.
14. When an asset is constructed, such as the development of a new runway, all costs for
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construction-related materials and labour costs can be capitalized. Also, any electricity and
utilities consumed relating to the project, plus a reasonable amount for depreciation on any
equipment used during construction. Other permitted costs include design fees, building
materials and any interest charges on debt outstanding during the period of construction
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incurred to finance the project.
AP
PR
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ED
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IA
UV
ST
, TABLE OF CONTENTS
Solutions Manual: Fundamental Accounting Principles, Volume 2,
18th Canadian Edition
Authors: Kermit Larson, Heidi Dieckmann, John Harris, Erin Creagh
ST
Chapter 9. Property, Plant, and Equipment and Intangibles
UV
Chapter 10. Current Liabilities
Chapter 11. Partnerships
Chapter 12. Organization and Operation of Corporations
IA
Chapter 13. Corporate Reporting: Profit, Earnings Per Share, and Retained Earnings
Chapter 14. Bonds and Long-Term Notes Payable
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Chapter 15. Accounting for Debt and Share Investments
Chapter 16. Reporting and Analyzing Cash Flows
Chapter 18. Analyzing Financial Statements
AP
PR
OV
ED
? ?
, Last revised: December 2023
Chapter 9 Property, Plant and Equipment and Intangibles
ST
Concept Review Questions
1. A property, plant and equipment asset is long-lived in that it has a service life of longer than
one accounting period; it is used in the production or sale of products or services. It is
UV
different from other assets such as receivables or inventory in that the property, plant and
equipment is used within the operations of business to generate profit, whereas inventory
is purchased or manufactured for resale. Receivables represent the amounts due from
customers based on past transactions.
2. Land held for future expansion is classified as a long-term investment. It is not a property,
IA
plant and equipment asset because it is not being used in the production or sale of other
assets or services.
3. The cost of a property, plant and equipment asset includes all normal, reasonable, and
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necessary costs of getting the asset in place and ready to use. For example, cost includes
such items as the invoice price paid, freight costs, non refundable sales taxes (PST, HST)
and all costs incurred related to installing and testing an asset before it is put into use.
AP
4. Land is an asset with an unlimited life and, therefore, is not subject to depreciation. Land
improvements refer to items such as fencing, parking lots surfaces, landscape lighting and
have limited lives and are depreciated over their useful lives.
5. No. The Accumulated Depreciation, Machinery account is a contra asset account with a
PR
credit balance that does not represent cash or any other funds. Funds available for buying
machinery would be shown on the balance sheet as liquid assets with debit balances, such
as the account Cash and Cash Equivalents. The balance of the Accumulated Depreciation,
Machinery account shows the portion of the machinery's original cost that has been
charged to depreciation expense, and gives some indication of how soon the asset will
OV
need to be replaced.
6. Repairs are made to keep a plant and equipment asset in normal, good operating
condition, and should be charged to expense of the current period. Repairs and
maintenance expenses decrease profit on the income statement in the current period.
Betterments are made to extend the service potential or the life of a plant and equipment
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asset beyond the original estimated life and are charged to the plant and equipment asset
account. After incurring a betterment, a depreciation policy also needs to be established.
7. Because the $75 cost of the plant and equipment asset is not likely to be material to the
users of the financial statements, the materiality principle justifies charging it to expense.
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8. Spin Master had Depreciation and amortization of 68.2 and 111.9 (millions) in 2022 and
2021 as seen on the Consolidated statements of Cash flows. More information about this
change can be found in the notes.
9. A company might sell or exchange an asset when it reaches the end of its useful life, or if it
becomes inadequate or obsolete, or because the company has changed its business plans.
An asset may also be damaged or destroyed by fire or some other accident.
, Last revised: December 2023
10. An intangible asset has no physical existence. Its value comes from the unique legal and
contractual rights held by its owner.
11. Types of intangible assets are patents, copyrights, leaseholds, drilling rights, and
ST
trademarks.
12. Gildan reported $229,951,000 as Intangible assets at January 1, 2023. Gildan reported
Goodwill at January 1, 2023 of $271,677,000.
UV
13. A business can only record goodwill when the price paid for a company being purchased
exceeds the fair market value of this company’s net assets (assets minus liabilities) if
purchased separately.
14. When an asset is constructed, such as the development of a new runway, all costs for
IA
construction-related materials and labour costs can be capitalized. Also, any electricity and
utilities consumed relating to the project, plus a reasonable amount for depreciation on any
equipment used during construction. Other permitted costs include design fees, building
materials and any interest charges on debt outstanding during the period of construction
?_
incurred to finance the project.
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OV
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