Construction of a new plant:
Architect's fees $ 4,000
Cash paid for land and run-down building thereon 120,000
Removal of old building 18,000
Salvage from sale of old building parts (4,000)
Survey to site the new building 800
Legal fees for title search 1,400
Excavation for construction for basement 15,200
Machinery purchased 61,000
Storage charges on machinery because the building was
not ready when machinery was delivered 500
Freight on machinery purchased 1,200
Hauling charges to deliver machinery from storage to new building 300
New building constructed 600,000
Installation of machinery 2,300
Required:
a) Prepare a schedule showing the amounts to be recorded as Land, Buildings, and Machinery and Equipment.
b) Prepare the journal entry to record the above.
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To prepare a schedule showing the amounts to be recorded as Land, Buildings, and Machinery and Equipment, we need to analyze each item in the given information and classify them into the appropriate categories.
a) Schedule of Land, Buildings, and Machinery and Equipment:
Land:
- Cash paid for land and run-down building thereon: $120,000
Buildings:
- Architect's fees: $4,000
- Removal of old building: $18,000
- Salvage from sale of old building parts: ($4,000) (Note: the negative sign indicates a reduction in cost)
- Survey to site the new building: $800
- Legal fees for title search: $1,400
- Excavation for construction for basement: $15,200
- New building constructed: $600,000
- Installation of machinery: $2,300
Machinery and Equipment:
- Machinery purchased: $61,000
- Storage charges on machinery because the building was not ready when machinery was delivered: $500
- Freight on machinery purchased: $1,200
- Hauling charges to deliver machinery from storage to new building: $300
b) Journal Entry:
To record the above costs, we need to create a journal entry.
Debit:
Land: $120,000
Buildings: $642,200 ($4,000 + $18,000 + $800 + $1,400 + $15,200 + $600,000 + $2,300)
Machinery and Equipment: $62,000 ($61,000 + $500 + $1,200 + $300)
Credit:
Cash: $620,700 ($120,000 + $642,200 - $4,000)
Or if the payment is made in installments or using different methods, the appropriate accounts should be credited accordingly.
Please note that the journal entry may vary depending on the specific accounting method and any additional information provided. It is always recommended to consult with an accountant or professional when recording financial transactions.