Question

Skysong 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				$598
Architect’s fees				3,646
Cash paid for land and dilapidated building thereon				100,050
Removal of old building		$23,000
Less: Salvage		6,325		16,675
Interest on short-term loans during construction				8,510
Excavation before construction for basement				21,850
Machinery purchased (subject to 2% cash discount, which was not taken)				63,250
Freight on machinery purchased				1,541
Storage charges on machinery, necessitated by noncompletion of
building when machinery was delivered				2,507
New building constructed (building construction took 6 months from
date of purchase of land and old building)				557,750
Assessment by city for drainage project				1,840
Hauling charges for delivery of machinery from storage to new building				713
Installation of machinery				2,300
Trees, shrubs, and other landscaping after completion of building
(permanent in nature)				6,210

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. Company uses net method to record discount. (Please leave spaces blank if there is no answer. Do not enter zeros in those spaces.)

	Land	Buildings	Machinery and Equipment	Other
Abstract company’s fee for title search	$	$	$	$
Architect’s fees
Cash paid for land and old building
Removal of old building
Interest on short-term loans during construction
Excavation before construction for basement
Machinery purchased
Freight on machinery purchased
Storage charges on machinery	$	$	$	$
New building constructed
Assessment by city for drainage project
Hauling charges
Installation of machinery
Trees, shrubs, and other landscaping

Answer 1

Solution :-

	Land	Buildings	Machinery and Equipment	Other
Abstract company’s fee for title search	$598
Architect’s fees		$3,646
Cash paid for land and old building	$100,050
Removal of old building	= $23,000 - $6,325 = $16,675
Interest on short-term loans during construction		$8,510
Excavation before construction for basement		$21,850
Machinery purchased			= $63,250 * [ 100 % - 2% ] = $63,250 * 98% = $61,985	= 63,250 * 2% = $1,265
Freight on machinery purchased			$1,541
Storage charges on machinery				$2,507
New building constructed		$557,750
Assessment by city for drainage project	$1,840
Hauling charges				$713
Installation of machinery			$2,300
Trees, shrubs, and other landscaping	$6,210
	= $598 + $100,050 + $16,675 +  $1,840 + $6,210 = $125,373	= $3,646 + $8,510 + $21,850 + $557,750 = $591,756	= $61,985 + $1,541 + $2,300 = $65,826	= $1,265 + $2,507 + $713 = $4,485