Oslo Company was formed on January 1, 2007, and began constructing a new plant. At the end


Oslo Company was formed on January 1, 2007, and began constructing a new plant. At the end of 2007, 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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Oslo Company 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 Oslo’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. User Insight: What impact does the classification of the items among several accounts have on evaluating the profitability performance of the company?
Comparison of Depreciation Methods

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Financial Accounting

ISBN: 9780547070025

9th Edition

Authors: Jr. Belverd E. Needles, Marian Powers

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