Business
Trudy Company incurred the following costs:
Sales tax on factory machinery purchased $5,000
Painting of and lettering on truck immediately upon purchase $700
Installation and testing of factory machinery $2,000
Real estate broker`s commission on land purchased $3,500
Insurance premium paid for first year`s insurance on new truck $880
Cost of landscaping on property purchased $7,200
Cost of paving parking lot for new building constructed $17,900
Cost of cleaning, draining, and filling land $13,300
Architect`s fees on self-constructed building $10,000
Solution:
Sales tax on factory machinery purchased $5,000 (Plant)
Painting of and lettering on truck immediately upon purchase $700 (Equipment)
Installation and testing of factory machinery $2,000 (Plant)
Real estate broker`s commission on land purchased $3,500 (Land)
Insurance premium paid for first year`s insurance on new truck $880 (Prepaid Ins)
Cost of landscaping on property purchased $7,200 (Land Improvements)
Cost of paving parking lot for new building constructed $17,900 (Land Improvements)
Cost of cleaning, draining, and filling land $13,300 (Land)
Architect`s fees on self-constructed building $10,000 (Building)
Items of property, plant and equipment needs to be initially recorded at the cost. All the costs are necessary to assure all the assets are working as there are intended use. This includes the original purchase price and the cost of the site preparation, delivery, installation, handling, and professional fees including the architects and engineers with the estimation for the removal and dismantling these assets for the renovation of the site. It is really important to know management intends when applying this cost principle. All principle cost of the assets are to be recorded, this will equal the value which was reciprocated at the time of attainment. The assets in the United States, such as buildings and land appreciate in value over a certain period of time and this assets will
Sales tax on factory machinery purchased $5,000
Painting of and lettering on truck immediately upon purchase $700
Installation and testing of factory machinery $2,000
Real estate broker`s commission on land purchased $3,500
Insurance premium paid for first year`s insurance on new truck $880
Cost of landscaping on property purchased $7,200
Cost of paving parking lot for new building constructed $17,900
Cost of cleaning, draining, and filling land $13,300
Architect`s fees on self-constructed building $10,000
Solution:
Sales tax on factory machinery purchased $5,000 (Plant)
Painting of and lettering on truck immediately upon purchase $700 (Equipment)
Installation and testing of factory machinery $2,000 (Plant)
Real estate broker`s commission on land purchased $3,500 (Land)
Insurance premium paid for first year`s insurance on new truck $880 (Prepaid Ins)
Cost of landscaping on property purchased $7,200 (Land Improvements)
Cost of paving parking lot for new building constructed $17,900 (Land Improvements)
Cost of cleaning, draining, and filling land $13,300 (Land)
Architect`s fees on self-constructed building $10,000 (Building)
Items of property, plant and equipment needs to be initially recorded at the cost. All the costs are necessary to assure all the assets are working as there are intended use. This includes the original purchase price and the cost of the site preparation, delivery, installation, handling, and professional fees including the architects and engineers with the estimation for the removal and dismantling these assets for the renovation of the site. It is really important to know management intends when applying this cost principle. All principle cost of the assets are to be recorded, this will equal the value which was reciprocated at the time of attainment. The assets in the United States, such as buildings and land appreciate in value over a certain period of time and this assets will