Question

A company made the following expenditures in connection with the construction of its new building: Architect’s fees for the new building $25,000 Cash paid for land and run-down building on the land 425,000 Removal of old building 17,500 Salvage from sale of old building materials 6,000 Construction survey to site the new building 3,500 Legal fees for title search 4,500 Excavation for basement construction 45,500 Machinery purchased for operations 250,000 Storage charges on machinery because building was not ready when machinery was delivered 1,200 Freight on machinery purchased 1,500 Hauling charges to deliver machinery from storage to new building 375 Construction costs of new building 1,675,000 Paid employees to train them on new machine 3,500 Landscaping 35,000 Installation of machinery 4,500 Prepare a schedule showing the amounts to be recorded as land, buildings, and machinery.

Answer 1

A schedule showing the amounts to be recorded as land, buildings, and machinery is as follows:

	land ($)	buildings ($)	Machinery ($)
Architect’s fees for the new building		25,000
Cash paid for land and run-down building on the land	425,000
Removal of old building	17,500
Salvage from sale of old building materials	(6,000)
Construction survey to site the new building		3,500
Legal fees for title search	4,500
Excavation for basement construction (Building)		45,500
Purchased Machinery			250,000
Storage charges on machinery			0
Freight on machinery purchased			1,500
Hauling charges to deliver machinery from storage			0
Construction costs of new building		1,675,000
Paid employees to train them on new machine			0
Landscaping	35,000
Installation of machinery			4,500
Total	$476,000	$1,749,000	$256,000

Note: Storage charges on machinery,Hauling charges to deliver machinery from storage and Paid employees to train them on new machine are considered to be operating expenses.