Accounting 2 Problem
E10-5 (Treatment of Various Cost) 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 520
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Architect’s fees 3,170
Cash paid for land and dilipidated building thereon 87,000
Removal of old building 20,000
Less:Salvage 5,500 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, 55,000
which was not taken)
Freight on machinery purchased 1,340
Storage charges on machinery, necessitated by 2,180
noncompletion of building when machinery was delivered
New building constructed (building construction took 6 months 485,000
from date of purchase of land and old building)
Assessment by city for drainage project 1,600
Hauling charges for delivery of machinery from storage 620
to new building
Installation of machinery 2,000
Trees, shrubs, and other landscaping after completion 5,400
of building (permanent in nature)
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 be recorded.
