Question

- Kimmel, Survey of Accounting, le Help System Announcements Brief Exercise 204 Indicate whether each of the following expenditures should be classified as land, land improvements, buildings, equipment, or none of these. 1. Parking lots 2. Electricity used by a machine 3. Excavation costs Land Improvements 4. Interest on building construction loan Buildings 5. Cost of trial runs for machinery Equipment 6. Drainage costs Land 7. Cost to install a machine None of these 8. Fences 9. Unpaid (past) property taxes assumed 10. Cost of tearing down a building when land and a building on it are purchased Click if you would like to Show Work for this question: Open Show Work Question Atte Hi e QWP

Answer 1

a) parking lots comes under definition of land improvements as they have a limited life and they are depreciated

b) electricity used by machines is not an asset and will come in category of none of these .

c) excavation cost is cost which occurs to remove or demolished the existing building or structure from property and while purchasing the land its included in cost of land so it will come in land category

d) interest in building construction loan is cost which is added as capitalization value in cost of building so it will come in category of building

e) cost of trail runs of machinery- as per accounting standard trail runs are added to cost of equipment and sale of goods produced from it are deducted from cost so trail runs of machinery comes in category of Equipment

f)Drainage cost  is cost which improve the functionality of land and its is expense which is spend so its is considered as Land improvement

g) cost to install machine - any cost which happens before the installation of assets and without that expense the asset will not be asset then that cost is capitalized so it is Equipment

h)Fenses - land of improvement as it protects the land not add value to land .

i) Unpaid property tax assumed - None of these

j) cost of tearing down the building when land and building on it are purchased , in this case building is purchased not land , as building has depreciated value where as land does not have as in books its recorded as building and then building is demolished so cost of tearing building will added in cost of building and it comes in category of Building