Question

Sub Sandwiches of America made the following expenditures related to its restaurant:
1. Replaced the heating equipment at a cost of $250,000.
2. Covered the patio area with a clear plastic dome and enclosed it with glass for use during the winter months. The total cost of the project was $750,000.
3. Performed annual building maintenance at a cost of $24,000.
4. Paid for annual insurance for the facility at $8,800.
5. Built a new sign above the restaurant, putting the company name in bright neon lights, for $9,900.
6. Paved a gravel parking lot at a cost of $65,000.
Required: Sub Sandwiches of America credits Cash for each of these expenditures. Indicate the account it debits for each.

Answer 1

Answer:

1. Fixed asset or Property Plant and Equipment

2. Land Improvement

3. Repairs and maintenance expense

4. Prepaid Insurance

5. Other operating expense

6. Land improvements

Explanation:

When cash is paid for either an asset or an expense, the cash account is credited while the asset or expense account is debited. The heating equipment is a fixed asset. The covering of the patio area is a form of land improvement. Annual maintenance cost on building is an expense.

Annual insurance on facility is a form of prepayment. New sign above the company is an expense. Paving of parking lot is a form of land Improvement.