# Accounting for land - Finance Capitalization of Fixed Assets

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```					              Sub: Finance                                                  Topic: Capitalization of Fixed Assets

Question:
Capitalization of land, building and machinery acquired, capitalization of
installation, improvement (demolition of existing structures included) and
interest expense

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Choose the correct answer from the given option.

Solution:
1. On August 1, 2007, Jorden Corporation purchased a new machine on a deferred payment
basis. A down payment of \$1,500 was made and 4 monthly installment of \$2,000 each are to
be made beginning on September 1, 2007. The cash equivalent price of the machine was
\$8,000. Jorden incurred and paid installation costs amounting to \$250. The amount to be
capitalized as the cost of the machine is
a. \$8,000.
b. \$8,250.
c. \$9,500.
d. \$9,750.

2. On December 1, 2007, Neely Co. purchased a tract of land as a factory site for \$700,000. The
old building on the property was razed, and salvaged materials resulting from demolition
were sold. Additional costs incurred and salvage proceeds realized during December 2007
were as follows:

Cost to r
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Description: Based on acquisition mode and market value accounting for land and other fixed assets acquired for business : Plant assets purchased on long-term credit contracts should be accounted for at .
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