Categories of Tangible noncurrent Opreating Assets The following costs were incu

Question

Categories of Tangible noncurrent Opreating Assets The following costs were incurred in the most recent year: Paid $20,000 to purchase a piece of equipment. In addition, paid $1,000 to have the equipment shipped to and installed in its final location. Spent $1,750 to have the equipment tested before beginning its production use Paid $7,000 for lubrication and normal maintenance during the first year of operation of the equipment. Paid $100,000 to buy a piece of land Also pa d $10,000 to construct a parking lot and sidewalks Paid $50,000 to buy another piece of lard Then paid $10,000 to have an old building demolished and have the land cleared. Pad $125,000 to have a building constructed. Compute the total cost that should be reported in each of the following categories:

Explanation / Answer

1. Cost of Land = Purchase Price + Cost of land purchased for building construction

= 100000 + 50000

= $150000

2. Cost of Building = Contstruction Cost of Building + Construction Cost of Parking Lot

= 50000 + 10000

= $60000

3. Cost of Equipment = Purchase Cost + Installation Cost + Testing cost

= 20000 + 1000 + 1750

= $22750

4. Cost of land Improvements = Demolishing cost of old building

= $10000

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