Only costs necessary for preparing a long-lived asset for use should be included
as a cost of the asset. Unnecessary costs that do not increase the asset’s usefulness are
recorded as an expense. For example, the following costs are treated as an expense:- Vandalism
- Mistakes in installation
- Uninsured theft
- Damage during unpacking and installing
- Fines for not obtaining proper permits from governmental agencies
402 Chapter 9 Fixed Assets and Intangible Assets
Land
Building
Machinery & Equipment
- Architects’ fees
- Engineers’ fees
- Insurance costs incurred during construction
- Interest on money borrowed to finance
construction - Walkways to and around the building
- Sales tax
- Repairs (purchase of existing building)
- Reconditioning (purchase of existing building)
- Modifying for use
- Permits from government agencies
- Sales taxes
- Freight
- Installation
- Repairs (purchase of used equipment)
- Reconditioning (purchase of used equipment)
- Insurance while in transit
- Assembly
- Modifying for use
- Testing for use
- Permits from government agencies
- Purchase price
- Sales taxes
- Permits from government agencies
- Broker’s commissions
- Title fees
- Surveying fees
- Delinquent real estate taxes
- Razing or removing unwanted
buildings, less any salvage - Grading and leveling
- Paving a public street bordering the
land
Land Improvements
- Trees and shrubs
- Fences
- Outdoor lighting
- Paved parking areas
Exhibit 3
Costs of Acquiring
Fixed AssetsQ.Glacier Co. is purchas-
ing property (building and
land) for use as a ware-
house. In purchasing the
land, Glacier has agreed
to pay the prior owner’s
delinquent property taxes.
Should the cost of paying
the delinquent property
taxes be included as part
of the cost of the property?A.Yes. All costs of acquir-
ing the property, including
the delinquent property
taxes, should be included
as part of the total cost of
the property.