Chapter 10, Problem 2P

To determine

Acquisition of land in exchange of Common shares: Any cost incurred to acquire the asset and to bring the asset to use is capitalized; e.g., Purchase price of the asset, installation charges of machinery, freight charges, razing of old building, draining the land in case of Land are capitalized. In other words, any cost incurred before putting the asset to use is capitalized. Assets can be acquired for cash or in exchange of common stock. Sometimes an asset can be acquired in exchange of an existing used asset. The used asset would be exchanged at a price which may be more or less than the cost of the new asset.

(a)

To indicate: To indicate the recording of the assets in the balance sheet.

To determine

(b)

To indicate: To indicate the treatment of items not included in (a).