The major characteristics of property, plant, and equipment are: 1) They are acquired for use in operations and not for resale. 2) They are long-term in nature and usually depreciated. 3) They possess physical substance. Most companies use historical cost as the basis for valuing property, plant, and equipment. Historical cost measures the cash or cash equivalent price of obtaining the asset and bringing it to the location and condition necessary for its intended use. For example, companies like Kellogg Co. consider the purchase price, freight costs, sales taxes and installation costs of a productive asset as part of the asset's cost. It then allocates these costs to future periods through depreciation. Subsequent to acquisition, companies should not write up property, plant, and equipment to reflect fair value when it is above cost. The main reasons for this position: 1) Historical cost involves actual, not hypothetical, transactions and so is the most reliable. 2) Companies should not anticipate gains and losses but should recognize gains and losses only when the asset is sold Exercises: #1) Indicate which of the following costs should be expensed when incurred. (a) $13,000 paid to rearrange and reinstall machinery. (b) $200,000 paid for addition to building. (c) $200 paid for tune-up and oil change on delivery truck (d) $7,000 paid to replace a wooden floor with a concrete floor (e) $2,000 paid for a major overhaul on a truck, which extends the useful life. #2) Columbia Company, which manufactures machine tools, had the following transactions related to plant assets in 2017. On June 2, 2017, Columbia purchased a stamping machine at a retail price of $12,000. Columbia paid 6% sales tax on this purchase. Columbia paid a contractor $2,800 for a specially wired platform for the machine, to ensure noninterrupted power to the machine. Columbia estimates the machine will have a 4-year useful life, with a salvage value of $2,000 at the end of 4 years. At what amount should Columbia record the acquisition cost of the machine