Exercise NO: 5

Ben Sisko Supply Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipmen

Ben Sisko Supply Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment.

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Abstract company’s fee for title search $ 520

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Architect’s fees 3,170

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Cash paid for land and dilapidated building thereon 87,000

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Removal of old building $20,000

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Less: Salvage 5,500 14,500

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Interest on short-term loans during construction 7,400

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Excavation before construction for basement 19,000

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Machinery purchased (subject to 2% cash discount, which was not taken) 55,000

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Freight on machinery purchased 1,340

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Storage charges on machinery, necessitated by noncompletion of building when machinery was delivered 2,180 New building constructed (building construction took 6 months from date of purchase of land and old building) 485,000

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Assessment by city for drainage project 1,600

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Hauling charges for delivery of machinery from storage to new building 620

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Installation of machinery 2,000

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Trees, shrubs, and other landscaping after completion of building (permanent in nature) 5,400

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Instructions

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Determine the amounts that should be debited to Land, to Buildings, and to Machinery and Equipment.

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Assume the benefits of capitalizing interest during construction exceed the cost of implementation. Indicatehow any costs not debited to these accounts should be recorded.

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