On Janurary 1,2012, Jose Company purchased a building for $200,000 and a deliver

Question

On Janurary 1,2012, Jose Company purchased a building for $200,000 and a delivery truck for $20,000. The following expenditures have been incurred during 2014:

* The building was painted at the cost of $5,000

* To prevent leaking, new windows were installed in the building at a cost of $10,000.

* To improve production, a new conveyor system was installed at a cost of $40,000

* The delivery truck was repainted with a new compnay logo at a cost of $1,000

* The allow better handling of larger loads, a hydraulic lift system was installed on the truck at a cost of $5,000

* The truck's engine was overhauled at a cost of $4,000

1.Determine which of those costs should be capitalized. Also record the journal entry for the capitalized costs.( The journal entry is important). Assume that all cost were incurred on Janurary 1. 2014.

Explanation / Answer

The following should get capitalized -->

1. New window installation as this will prevent leakages and increase building life

JOURNAL

Building Gross Block.. DR 10,000

Bank...........................CR   10,000

2. Conveyor system installation as this shall increase the productivity

JOURNAL

Conveyor System Gross Block ..DR 40,000

Bannk ........................................CR 40,000

3. Hydraulic lift system installed also to get capitalized

JOURNAL

Delivery Truck Gross Block ..DR 5,000

Bank .....................................CR 5,000

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.