Harshman Company constructed a building for its own use. The company incurred costs of $45,000 for materials and supplies, $64,000 for direct labor, and $5,000 for a supervisor's overtime that was caused by the construction. Harshman uses a factory overhead rate of 50% of direct labor cost. Before construction, the company had received a bid of $159,000 from an outside contractor. 1. Assuming common practice is followed, at what value should Harshman capitalize the building? 2. The cost of the constructed asset will more closely approximate the cost of an equivalent purchased asset when the approach is used.
Harshman Company constructed a building for its own use. The company incurred costs of $45,000 for materials and supplies, $64,000 for direct labor, and $5,000 for a supervisor's overtime that was caused by the construction. Harshman uses a factory overhead rate of 50% of direct labor cost. Before construction, the company had received a bid of $159,000 from an outside contractor. 1. Assuming common practice is followed, at what value should Harshman capitalize the building? 2. The cost of the constructed asset will more closely approximate the cost of an equivalent purchased asset when the approach is used.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Harshman Company constructed a building for its own use. The company incurred costs of $45,000 for materials and supplies, $64,000 for direct labor, and $5,000 for a supervisor's overtime that was caused by the construction. Harshman uses a factory
1. Assuming common practice is followed, at what value should Harshman capitalize the building?
2. The cost of the constructed asset will more closely approximate the cost of an equivalent purchased asset when the approach is used.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education