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Treatment of Various Costs

5. (Treatment of Various Costs) Ben Sisko 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 $ 520
Architect's fees 2,800
Cash paid for land and dilapidated building thereon 87,000
Removal of old building $20,000
Less: Salvage 5,500 14,500
Surveying before construction 370
Interest on short-term loans during construction 7,400
Excavation before construction for basement 19,000
Machinery purchased (subject to 2% cash discount, which 55,000
was not taken)
Freight on machinery purchased 1,340
Storage charges on machinery, necessitated by 2,180
noncompletion of building when machinery was delivered
New building constructed (building construction took 6 485,000
months from date of purchase of land and old building)
Assessment by city for drainage project 1,600
Hauling charges for delivery of machinery from storage to 620
new building
Installation of machinery 2,000
Trees, shrubs, and other landscaping after completion of 5,400
building (permanent in nature)

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.

Solution Summary

The solution explains the tratment of various costs relating to Ben Sisko Supply Company

$2.19