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Honey Casiple
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1. What expenditures are normally capitalized as cost of building that is constructed?

Costs of building when constructed 

a) Materials used, labor employed and overhead incurred during the construction
 b) Building permit or license 
c) Architect’s fee 
d) Superintendent fee 
e) Cost of excavation 
f) Cost of temporary building used as construction offices and tools or materials shed 

g) Expenditures incurred during the construction period such as interest on construction


loans and insurance 

h) Expenditures for service equipment and fixtures made permanent part of the structure 

i) Cost of temporary safety fence around the construction site and cost of subsequent
removal thereof.

 j) Safety inspection fee

2. What is the treatment of expenditures for sidewalks, pavements, parking lots and
driveways?

The question whether such expenditures should be charged to land improvements or


building. 
a) If such expenditures are part of the blueprint for the construction of a new building,
these are charged to the building account. 
b) On the other hand, if the expenditures are occasionally made or incurred not in
connection with the construction of a new building, these are charged to land
improvements.

3. What is the treatment of damages where no insurance is taken by the entity?

When insurance is not taken, an accounting problem arises when the entity is required to
pay claims for damages for injuries sustained during the construction. In this regard, it is
believed that the payment for damages should be expensed outright because the damages
represent management failure in procuring insurance and are not a reasonable and
necessary cost of construction. To charge the damages to the building would be
tantamount to concealment of the management failure or negligence.

4. What is the treatment of expenditures for ventilating system, lighting system and
elevator?
a) If installed during construction, the ventilating system, lighting system and elevator are
charged to the building account. 
b) Otherwise, these are charged to building improvements and depreciated over their
useful life or remaining life of the building, whichever is shorter.

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