E10-5B (Treatment of Various Costs) Backroad Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment.
mujionostevoE10-5B (Treatment of Various Costs) Backroad Company, a newly formed corporation, incurred the following
expenditures related to Land, to Buildings, and to Machinery and Equipment.
Attorney fee for title search $ 750
Architect’s fees 12,500
Assessment by city for roads 18,600
Cash paid for land and barn thereon 220,000
Excavation before construction to prepare land for building 12,000
Freight on equipment purchased 860
Hauling charges for delivery of equipment from storage to new building 700
Installation of equipment 2,600
Interest on long-term loans during construction 16,000
New building constructed (building construction took 6 months from
date of purchase of land and barn) 721,600
Removal of barn $10,000
Less: Salvage 500 9,500
Storage charges on equipment, necessitated because delivery was
made early 1,500
Trees, shrubs, and other landscaping after completion of building
(permanent in nature) 9,200
Equipment purchased (subject to 2% cash discount, which was not taken) 80,000
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.
12 years ago
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