Krall Company was formed on January 1, 2014, and began constructing a new plant. At the end of 2014, its auditor discovered that all expenditures involving long-term assets had been debited to an account called Fixed Assets. An analysis of the Fixed Assets account, which had a year-end balance of $2,644,972, disclosed that it contained the following items:
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Cost of land
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$ 316,600
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Surveying costs
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4,100
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Transfer of title and other fees required by the county
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920
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Broker's fees for land
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21,144
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Attorney's fees associated with land acquisition
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7,048
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Cost of removing timber from land
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50,400
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Cost of grading land
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4,200
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Cost of digging building foundation
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34,600
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Architect's fee for building and land improvements (80 percent building)
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64,800
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Cost of building construction
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710,000
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Cost of sidewalks
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11,400
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Cost of parking lots
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54,400
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Cost of lighting for grounds
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80,300
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Cost of landscaping
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11,800
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Cost of machinery
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989,000
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Shipping cost on machinery
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55,300
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Cost of installing machinery
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176,200
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Cost of testing machinery
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22,100
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Cost of changes in building to comply with safety
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|
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regulations pertaining to machinery
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12,540
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Cost of repairing building that was damaged in the
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|
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installation of machinery
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8,900
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Cost of medical bill for injury received by
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|
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employee while installing machinery
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2,400
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Cost of water damage to building during heavy
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|
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rains prior to opening the plant for operation
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6,820
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Account balance
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$2,644,972
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Krall sold the timber it cleared from the land to a firewood dealer for $5,000. This amount was credited to Miscellaneous Income. During the construction period, two of Krall's supervisors devoted full time to the construction project. Their annual salaries were $48,000 and $42,000, respectively. They spent two months on the purchase and preparation of the land, six months on the construction of the building (approximately one-sixth of which was devoted to improvements on the grounds), and one month on machinery installation. When the plant began operation on October 1, the supervisors returned to their regular duties. Their salaries were debited to Factory Salaries Expense.
REQUIRED
1. Prepare a schedule with the following column headings: Land, Land Improvements, Buildings, Machinery, and Expense. Place each of the above expenditures in the appropriate column. Negative amounts should be shown in parentheses. Total the columns.
2. Concept- What impact does the classification of the items among several accounts have on evaluating the profitability performance of the company?