Question
1. A tract of land was acquired during the year. The land is the future site for expansion of the hospital, which will be constructed
1. A tract of land was acquired during the year. The land is the future site for expansion of the hospital, which will be constructed in the following year. Commissions were paid to the real estate agent used to acquire the land, and expenditures were made to relocate the previous owner's equipment. These commissions and expenditures were expensed and are excluded from property, plant, and equipment.
2. Clearing costs were incurred to make the land ready 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 diagnostic machines was purchased under a royalty agreement that provides royalty payments based on how often the machines were used to deliver diagnostics services. The cost of the machines, freight costs, unloading charges, and royalty payments were capitalized and are included in property, plant, and equipment.
Required:
a) Identify the relevant assertions for property, plant, and equipment, and indicate the principal substantive tests pertaining to each.
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