Identify the amounts that should be debited to buildings

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Reference no: EM13872345

Purpose: This exercise will give you practice in identifying expenditures to be capitalized.

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

Cash paid for land and dilapidated building thereon


$    300,000

Removal of old building

$ 60,000


Less salvage

16,500

43,500

Surveying before construction to determine best position for building

1,110

Interest on short-term loans during construction

22,200

Excavation before construction for basement

57,000

Fee for title search charged by abstract company

1,560

Architect's fees

8,400

Machinery purchased (subject to 2% cash discount,


which was not taken)

165,000

Freight on machinery purchased

4,020

Storage charges on machinery, necessitated by noncompletion


of building when machinery was delivered on schedule

6,540

New building constructed (building construction took 8 months


from date of purchase of land and old building)

1,500,000

Assessment by city for sewers (a one-time assessment)

4,800

Transportation charges for delivery of machinery from storage to new building

1,860

Installation of machinery

6,000

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

16,200

Instructions

(a) Identify the amounts that should be debited to Land.

(b) Identify the amounts that should be debited to Buildings.

(c) Identify the amounts that should be debited to Machinery and Equipment.

(d) Indicate how the costs above not debited to Land, Buildings, or Machinery and Equipment should be recorded.

Reference no: EM13872345

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