Question

In: Accounting

III.Indicate which of the following is Building cost (B) , Land cost (L) , Machinery and...

III.Indicate which of the following is Building cost (B) , Land cost (L) , Machinery and Equpment ( M and E) or simply an Expense (E) cost by designating the appropriate letter. (total 30 points)

a. Engineer’s fees of $100,000 for the building_____

b Assembly cost of $10, 000 for the new copier _____

c. Vandalism cost of $1,000 on the building during construction ______

d. Title fees of $20,000 to close the sale on the Land __________

e. Broker’s commission on the Land purchase ___________

f. Interest incurred on financing the construction __________

g,Fines paid to City of Austin for not obtaining the proper permits _____

h. Testing cost of $500 for the new copier _____________

i. Purchase price of Land $1,000,000______________

j Mistakes made in installation costing $5,000 ________

Expert Solution

a	Engineer’s fees of $100,000 for the building	B
b	Assembly cost of $10, 000 for the new copier	M
c	Vandalism cost of $1,000 on the building during construction	E
d	Title fees of $20,000 to close the sale on the Land	L
e	Broker’s commission on the Land purchase	L
f	Interest incurred on financing the construction	B
g	Fines paid to City of Austin for not obtaining the proper permits	E
h	Testing cost of $500 for the new copier	E
i	Purchase price of Land $1,000,000	L
j	Mistakes made in installation costing $5,000	E

Reasons

a. it is direct cost used for the making the asset ready to use.

b. capitalized because it is incurred to make the asset in ready to use status

c.not capitalized and put in normal expense because it does not relate to make asset ready to use.

d. capitalized to asset because it is necessary to take the asset in legal ownership

e. capitalized because it is incurred to make the asset ready to use

f. capitalized because this is also a cost to finance the construciton without which asset cannot be used

g. treated as normal expense because it is not incurred in connection to make the asset ready to use

h. not capitalized because testing cost are incurred after the asset is put to use.

i. capitalized as it is the purchase price of asset

j. not capitalized as it is not incurred for putting asset to use.

ekkarill92 answered 2 years ago

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