. Cergo Computers constructed a new training center in 2014, which you have
been hired to manage. A review of the accounting records shows the following
expenditures debited to an asset account called Training Center:
Attorney’s fee, land acquisition $ 34,900
Cost of land 598,000
Architect’s fee, building design 102,000
Building 1,020,000
Parking lot and sidewalk 135,600
Electrical wiring, building 164,000
Landscaping 55,000
Cost of surveying land 9,200
Training equipment, tables, and chairs 136,400
Installation of training equipment 68,000
Cost of grading the land 14,000
Cost of changes in building to soundproof rooms 59,200
Total account balance $2,396,300
During the center’s construction, an employee of Cergo worked full-time
overseeing the project. He spent two months on the purchase and preparation
of the site, six months on the construction, one month on land improvements,
and one month on equipment installation and training-room furniture purchase
and setup. His salary of $64,000 during this ten-month period was charged to
Administrative Expense. The training center was placed in operation on
November 1.
Required
1. Prepare a schedule with the following four column (account) headings:
Land, Land Improvements, Building, and Equipment. Place each of the
above expenditures in the appropriate column. Total the columns.
2. What impact does the classification of the items among several accounts
have on evaluating the profitability performance of the company?

1. The schedule is prepared as follows:

2. The assets capitalized into different classes carry different rates and methods of depreciation.   Items capitalized under land will not be depreciated and hence it is capital expenditure not effecting the expenditure.

Explanation:

1.  Schedule of expenses

Expenses                      Land                   Land            Building         equipment

                                                         improvements

Attorney’s fee, land acq   34900

Cost of land                       589000

Architect’s fee, building design                                  102000

Building                                                                         1020000

Parking lot and sidewalk                       135600

Electrical wiring, building                                                164000

Landscaping                                             55000

Cost of surveying land                              9,200

Training equipment, tables, and chairs                                             136,400

Installation of training equipment                                                      68,000

Cost of grading the land                            14,000

Cost of changes in building to soundproof rooms        59,200

Employee expenses alloted  12800          6400           38400            6400

TOTAL                                     636700        220200       1383600       210800

2.  Depreciation on land improvements start when the project becomes substantially completed.

Depreciation on building starts when the building construction is substantially completed.

Depreciation on Equipments starts when the equipments begin to be put to use.

c

explanation: