Question

dama Company incurred the following costs. Indicate to which account Adama would debit each of the costs. 1. Sales tax on factory machinery purchased $ 5,000 2. Painting of and lettering on truck immediately upon purchase 700 3. Installation and testing of factory machinery 2,000 4. Real estate broker’s commission on land purchased 3,500 5. Insurance premium paid for first year’s insurance on new truck 880 6. Cost of landscaping on property purchased 7,200 7. Cost of paving parking lot for new building constructed 17,900 8. Cost of clearing, draining, and filling land 13,300 9. Architect’s fees on self-constructed building 10,000

Answer 1

Answer:

Explanation:

Select the account to be debited

Equipment Prepaid Insurance Building Land Land Improvements

These are the accounts which are given in the question

1. Sales tax on factory machinery purchased $ 5,000 - Equipment account as it it is related to factory machinery

2. Painting of and lettering on truck immediately upon purchase 700  - Equipment account as it it is related to factory machinery

3. Installation and testing of factory machinery 2,000  - Equipment account as it it is related to factory machinery

4. Real estate broker’s commission on land purchased 3,500 - Land as the land is purchased

5. Insurance premium paid for first year’s insurance on new truck 880 - Prepaid insurance as the advance insurance is paid

6. Cost of landscaping on property purchased 7,200 - Land improvements - as the landscaping cost is come under the land improvements

7. Cost of paving parking lot for new building constructed 17,900 - Land improvements - as the parking lot is come under the land improvements

8. Cost of clearing, draining, and filling land 13,300 - land - as the cost is incurred which is related to the land

9. Architect’s fees on self-constructed building 10,000 - Building - as the cost is incurred which is related to the building