Peter , CPA, is the auditor for a manufacturing company with a balance sheet that

includes the caption "Property, Plant and Equipment". River has been asked by

the Company's management if audit adjustments or reclassifications are

required for the following material items that have been included or excluded

from "Property, Plant and Equipment":

-A tract of land was acquired during the year. The land is the future site of the Client's

Headquarters which will be constructed in the following year. Commissions were

paid to the real estate agent used to acquire that 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".

- Clearing costs were incurred to make the land ready for construction. This costs were

included in the "Property, Plant and Equipment".

- 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".

- A group of machine was purchased under a royalty agreement which provides the

royalty payments based on units of production from the machines. The cost of the

machines, freight costs, loading charges, and royalty payments were capitalized and

included in "Property, Plant and Equipment".

Required

-Describe the general characteristics of assets, such as land,

improvements, machinery, equipment, fixtures, etc., that

should normally be classified as "Property, Plant and

Equipment" and identify audit objectives (i.e,, how an

auditor can obtain audit satisfaction) in connection with the

examination of "Property, Plant and Equipment".

-Indicate whether each of the above items numbered 1 to 4

requires one or more audit adjustments or reclassifications,

and explain why such adjustments or reclassifications are

required or nor required.