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(Solved) Purpose: (L.O. 2) This exercise will give you practice in identifying expenditures to be...


Purpose:     (L.O. 2) This exercise will give you practice in identifying expenditures to be capitalized.   Hughes Supply Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment.   Cash paid for land and dilapidated building thereon   $    300,000 Removal of old building $ 60,000   Less salvage   16,500 43,500 Surveying before construction to determine best     position for building 1,110 Interest on short-term loans during construction 22,200 Excavation before construction for basement 57,000 Fee for title search charged by abstract company 1,560 Architect’s fees 8,400 Machinery purchased (subject to 2% cash discount,   which was not taken) 165,000 Freight on machinery purchased 4,020 Storage charges on machinery, necessitated by noncompletion   of building when machinery was delivered on schedule 6,540 New building constructed (building construction took 8 months   from date of purchase of land and old building) 1,500,000 Assessment by city for sewers (a one-time assessment) 4,800 Transportation charges for delivery of machinery from storage   to new building 1,860 Installation of machinery 6,000 Trees, shrubs, and other landscaping after completion of building   (permanent in nature) 16,200   Instructions (a)                Identify the amounts that should be debited to Land. (b)               Identify the amounts that should be debited to Buildings. (c)                Identify the amounts that should be debited to Machinery and Equipment. (d)               Indicate how the costs above not debited to Land, Buildings, or Machinery and Equipment should be recorded.      

 


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