Chapter 10, Problem 10.1E

Which of the following would be considered a capital expenditure? (A 22) O Making a payment on accounts payable O Paying accumulated income taxes O Paying shipping insurance on new equipment Retiring a bond payable taken out for construction Which of the following costs CANNOT be capitalized as part of land? Price paid to purchase the land. Clearing old buildings and other obstructions Obligations assumed when buying the land Overhead costs for construction projects on the land

Who will have control over the operation of the property and decisions involving capital improvements, approving leases to tenants, financing and possibly refinancing the property, and when to sell the property?

Indicate whether each of the following statements is true or false. When land with an old building is purchased as a future building site, the cost of removing the old building is part of the cost of the new building.  Answer   Special assessments for local improvements such as streetlights and sewers should be accounted for as land improvements.  Answer   Avoidable interest is the amount of interest cost that a company could theoretically avoid if it had not made expenditures for the asset.

Which of the following is recorded as a cost when purchasing an existing building? A. cost to renovate the building before it is in use B. fencing O C. land where the building is located O D. parking lot around the building

Which of the following costs are capitalized when purchasing a piece of equipment? a. The invoiced price of the equipment b. Sales taxes c. All installation costs related to the equipment  d. All of the above

What factors should be considered when deciding whether to renovate a property?

In the summation (cost) method of valuation, which of the following steps is the ONLY one that a valuer would take in estimating value? a. Estimate the net operating income of the property. b. Determine the value of the land using the Assessed Annual Value and tax rate. c. Estimate the accrued depreciation. d. Calculate the acquisition price of the construction material used when the structure was built.

Which of the following is a criterion for a capital expenditure? a.It should increase the productive life or capacity of an asset.b.It must be significant in amount.c.It should benefit several periods.d.All of these are criteria for a capital expenditure.

What are some of the physical considerations that a developer should be concerned with when purchasing land? How should such considerations be taken into account when determining the price that should be paid?