Question

Cergo Computers constructed a new training center in 2014, which you have been hired to manage. A review of the accounting records shows the following expenditures debited to an asset account called Training Center:
Attorney’s fee, land acquisition ......... $ 34,900
Cost of land .................. 598,000
Architect’s fee, building design .......... 102,000
Building ................... 1,020,000
Parking lot and sidewalk ............ 135,600
Electrical wiring, building ........... 164,000
Landscaping ................... 55,000
Cost of surveying land .............. 9,200
Training equipment, tables, and chairs ........ 136,400
Installation of training equipment .......... 68,000
Cost of grading the land ............ 14,000
Cost of changes in building to soundproof rooms .. 59,200
Total account balance ............. $2,396,300
During the center’s construction, an employee of Cergo worked full-time overseeing the project. He spent two months on the purchase and preparation of the site, six months on the construction, one month on land improvements, and one month on equipment installation and training-room furniture purchase and setup. His salary of $64,000 during this ten-month period was charged to Administrative Expense. The training center was placed in operation on November 1.

Required
1. Prepare a schedule with the following four column (account) headings: Land, Land Improvements, Building, and Equipment. Place each of the above expenditures in the appropriate column. Total the columns.
2. What impact does the classification of the items among several accounts have on evaluating the profitability performance of the company?



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  • CreatedMarch 26, 2014
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