Question

13. Should a portion of prepaid overhead ever be allocated to self-cosntructed assets? Explain your answer including facts that would need to uncertained in making a determination of whether or not to allocate overhead.

14. If a company accure assets in exchange for property ( as opposed to cash), what is the process to determine the appropriate value to assigned acquired property?

Answer 1

13)

No, In any case any prepaid overhead should be allocated to self constructed assets they should always be presented as prepaid expenses and should be written off in next working period where company uses that services or which prepaid overhead was paid

14)

Firstly company should record transaction:

at fair value of asset acquired where possible (in our case fair value of assets)

and if fair value of asset can not be ascertained, transaction should be recognised

at fair value of asset exchanged (in our case Fair value of property)

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