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. Select the account it debits for each.

Question

Business

Rebecca Delacruz

14 May, 16:09

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. Select the account it debits for each.

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Answers (1)

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Tania Clements · Answer 1

1. Heating Equipment

2. Premises

3. Maintenance Expense

4. Prepaid Insurance

5. Intangible Asset; Logo

6. Premises

Explanation:

1. Replacement of heating equipment is substantial hence it is capitalized to the Heating Equipment Account.

2. The project is capitalized to the Premises Account as it form part of premises.

3. Annual Building maintenance is a revenue expenditure not capitalized.

4. An Asset Insurance Prepaid for future economic benefits to be realized is recognized.

5. The new sign would result in inflow of economic benefit and is non-tangible hence Intangible Asset is recognized.

6. Work done is capitalized in the Premises Account