Ben Sisko Supply Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment. Abstract company’s fee for title search $000520 Architect’s fees 3,170 Cash paid for land and dilapidated building thereon 87,000 Removal of old building $20,000 000Less: Salvage 0005,500 14,500 Interest on short-term loans during construction 7,400 Excavation before construction for basement 19,000 Machinery purchased (subject to 2% cash discount, which was not taken) 55,000 Freight on machinery purchased 1,340 Storage charges on machinery, necessitated by noncompletion of building when machinery was delivered 2,180 New building constructed (building construction took 6 months from date of purchase of land and old building) 485,000 Assessment by city for drainage project 1,600 Hauling charges for delivery of machinery from storage to new building 620 Installation of machinery 2,000 Trees, shrubs, and other landscaping after completion of building (permanent in nature) 5,400 Instructions Determine the amounts that should be debited to Land, to Buildings, and to Machinery and Equipment. Assume the benefits of capitalizing interest during construction exceed the cost of implementation. Indicate how any costs not debited to these accounts should be recorded.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Ben Sisko Supply Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment.

Abstract company’s fee for title search		$000520
Architect’s fees		3,170
Cash paid for land and dilapidated building thereon		87,000
Removal of old building	$20,000
000Less: Salvage	0005,500	14,500
Interest on short-term loans during construction		7,400
Excavation before construction for basement		19,000
Machinery purchased (subject to 2% cash discount, which was not taken)		55,000
Freight on machinery purchased		1,340
Storage charges on machinery, necessitated by noncompletion of building when machinery was delivered		2,180
New building constructed (building construction took 6 months from date of purchase of land and old building)		485,000
Assessment by city for drainage project		1,600
Hauling charges for delivery of machinery from storage to new building		620
Installation of machinery		2,000
Trees, shrubs, and other landscaping after completion of building (permanent in nature)		5,400

Instructions

Determine the amounts that should be debited to Land, to Buildings, and to Machinery and Equipment. Assume the benefits of capitalizing interest during construction exceed the cost of implementation. Indicate how any costs not debited to these accounts should be recorded.

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