Question

In: Accounting

C & M Securities made several expenditures during the current fiscal year, including the following: (a)...

C & M Securities made several expenditures during the current fiscal year, including the following:

(a)

For each of the items listed below, indicate whether the cost should be debited to land, buildings, equipment, land improvements, or an expense account.

Amount Description of Expenditure
1. $150,000 Acquisition of a piece of land to be used as a building site                                                           Expense or Land improvementsLandBuildingExpenseLand improvementsNo effectEquipmentExpense or Buildings
2. 3,000 Demolition of a small building on the land, to make way for the new building                                                           Expense or BuildingsExpenseBuildingNo effectExpense or Land improvementsLandEquipmentLand improvements
3. 7,500 Levelling of the land to prepare it for construction of the new building                                                           BuildingEquipmentExpense or BuildingsLand improvementsNo effectExpenseLandExpense or Land improvements
4. 290,000 Construction of the new building                                                           No effectLandExpense or Land improvementsExpense or BuildingsBuildingLand improvementsExpenseEquipment
5. 12,000 Paving of a parking lot beside the building                                                           BuildingExpense or BuildingsNo effectLandLand improvementsExpense or Land improvementsEquipmentExpense
6. 6,000 Addition of decorative landscaping around the building (such as planting flowers and ornamental shrubs)                                                           BuildingExpense or Land improvementsExpense or BuildingsLandNo effectEquipment
7. 80,000 Purchase of a new piece of equipment                                                           Expense or BuildingsEquipmentExpense or Land improvementsLandLand improvementsNo effectExpenseBuilding
8. 6,000 Sales taxes on the new equipment
If non-recoverable                                                           Land improvementsExpense or Land improvementsNo effectEquipmentBuildingExpense or BuildingsExpenseLand
If GST or HST                                                           Land improvementsEquipmentNo effectExpense or BuildingsExpense or Land improvementsExpenseBuildingLand
9. 3,000 Installation of the new equipment                                                           Expense or Land improvementsEquipmentNo effectBuildingLandLand improvementsExpenseExpense or Buildings
10. 1,500 Testing and adjustment of the new equipment prior to its use                                                           Land improvementsExpense or Land improvementsExpenseLandEquipmentBuildingNo effectExpense or Buildings
11. 1,000 Minor repairs to some old equipment                                                           LandLand improvementsNo effectExpenseExpense or Land improvementsBuildingExpense or BuildingsEquipment
12. 7,000 Major overhaul of an old piece of equipment, extending its useful life by three years                                                           EquipmentBuildingExpense or Land improvementsExpense or BuildingsExpenseLandNo effectLand improvements
13. 1,200 Routine maintenance of equipment                                                           Expense or Land improvementsLand improvementsBuildingEquipmentNo effectExpense or BuildingsExpenseLand
14. 2,000 Replacement of windows broken by disgruntled employees during a labour dispute                                                           ExpenseExpense or BuildingsBuildingLandLand improvementsNo effectExpense or Land improvementsEquipment

Solutions

Expert Solution

Amount Description of Expenditure
1 150000 Acquisition of a piece of land to be used as a building site Land
2 3000 Demolition of a small building on the land, to make way for the new building Land
3 7500 Levelling of the land to prepare it for construction of the new building Land
4 290000 Construction of the new building Buildings
5 12000 Paving of a parking lot beside the building Land improvements
6 6000 Addition of decorative landscaping around the building (such as planting flowers and ornamental shrubs) Land
7 80000 Purchase of a new piece of equipment Equipment
8 6000 Sales taxes on the new equipment
If non-recoverable Equipment
If GST or HST* No effect
9 3000 Installation of the new equipment Equipment
10 1500 Testing and adjustment of the new equipment prior to its use Equipment
11 1000 Minor repairs to some old equipment** Expense
12 7000 Major overhaul of an old piece of equipment, extending its useful life by three years Equipment
13 1200 Routine maintenance of equipment** Expense
14 2000 Replacement of windows broken by disgruntled employees during a labour dispute** Expense

*GST or HST will be debited to GST/HST paid or payable account and hence no effect has been mentioned since that option is not there in the options provided.

**Minor repairs to equipment, routine maintenance of equipment, and replacement of windows are expenditures incurred to maintain the assets in their current working condition and hence are charged to expense.


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