Gonzales, CPA, is the auditor for a manufacturing company with a bal- ance sheet that includes the entry "Property, plant, and equipment." Gonzales has been asked by the company's management if audit adjust- ments or reclassifications are required for the following material items that have been included in or excluded from "Property, plant, and equipment": 1. A tract of land was acquired during the year. The land is to be the fu- ture site of the client's new headquarters, which will be constructed next year. Commissions were paid to the real estate agent used to ac- quire the land, and expenditures were made to relocate the previous owner's equipment. These commissions and expenditures were ex- pensed and are excluded from "Property, plant, and equipment." 2. Clearing costs were incurred to ready the land for construction. These costs were included in "Property, plant, and equipment." 3. During the land-clearing process, timber and gravel were recovered and sold. The proceeds from the sale were recorded as other income and are excluded from "Property, plant, and equipment." 4. A group of machines was purchased under a royalty agreement that provides royalty payments based on units of production from the ma- chines. The costs of the machines, freight costs, unloading charges, and royalty payments were capitalized and are included in "Property, plant, and equipment." p-654