Hwang Corporation has engaged in a number expenditures relating to a land acquisition for a future plant. For each of the following, indicate whether your as the auditor of Hwang Corporation would propose an adjusting entry. Assume all transactions are material.
Yes- indicated a proposed adjusting entry is necessary.
No- indicates NO proposed adjusting is necessary.
1. Hwang purchased land for a new plant that it intends to construct. A portion of the cost was a commission paid to a real estate agent. That commission was capitalized as part of the cost of the land.
2. The purchased land was in part financed through obtaining a loan from a financial institution. Interest on that loan is being capitalized as part of the cost of the land.
3. An existing building on the land was torn down to allow construction of a new building on the land. The cost of the demolition was capitalized as part of the cost of the new building.
4. Subsequent to the land purchase, Hwang purchased certain equipment from a vendor who had filed for bankruptcy. Hwang's management believes that the equipment was purchased for an amount equal to approximately half what at least one other supplier sells it for. Hwang recorded the transaction at its cost.
5. Hwang cut down a number of trees on the land and sold the wood. Other income was recorded on the transaction for the amount of the cash received.