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    Treatment of Various Costs

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    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.

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    Solution Summary

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