Question

S (LO1.. Exec zon, Incurred the (LO 1, 2) (Treatment of Various Costs) Ben Sisko Supply Company, a newly formed corpora incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment Abstract company's fee for title search Exer $ 520 3,170 87,000 5,500 Architect's fees Cash paid for land and dilapidated building the con Removal of old building Less: Salvage $20.000 Interest on short-term loans during construction Excavation before construction for basement Machinery purchased (subject to 2% cash discount, which was not taken) Freight on machinery purchased Storage charges on machinery, necessitated by noncompletion of building when machinery was delivered New building constructed (building construction took 6 months from date of purchase of land and old building) Assessment by city for drainage project Hauling charges for delivery of machinery from storage to new building Installation of machinery Trees, shrubs, and other landscaping after completion of building (permanent in nature) 14.500 7.400 19,000 55,000 1,340 2.180 485,000 1,600 620 2,000 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. Indi- cate how any costs not debited to these accounts should be recorded.

Answer 1

	Land	Buildings	Machinery & Equipment	Other
Abstract company’s fee for title search	520
Architect’s fees		3170
Cash paid for land and dilapidated building thereon	87000
Removal of old building (20,000 - 5,500)	14500
Interest on short-term loans during construction		7400
Excavation before construction for basement		19000
Machinery purchased (subject to 2% cash discount, which was not taken). Company uses net method to record discount.			53900	1100	Miscellaneous expense (Discount lost = 55,000 x 2%)
Freight on machinery purchased			1340
Storage charges on machinery, necessitated by noncompletion of building when machinery was delivered				2180	Miscellaneous expense
New building constructed (building construction took 6 months from date of purchase of land and old building)		485000
Assessment by city for drainage project	1600
Hauling charges for delivery of machinery from storage to new building				620	Miscellaneous expense
Installation of machinery			2000
Trees, shrubs, and other landscaping after completion of building (permanent in nature)	5400