On January 1, 2012, Salina Company purchased land and a building for $2,240,000. At the time of the purchase, it was estimated that the building had a market value of $1,400,000. On January 5, Alberta installed a fence around the property at a cost of $14,000. Given this information, the entry to record the cost of the fence would include a

Question

Quizplus · Accepted Answer

The cost of installing a fence is considered a land improvement, not a separate asset such as a fence. Therefore, the entry would be a debit to Land Improvements Expense, a subcategory of Property, Plant, and Equipment (PPE), and a credit to Cash or Accounts Payable for the $14,000 cost. The other options are not correct because Land should not be debited for the cost of a fence, and Fence Expense is not a valid account.

On January 1, 2012, Salina Company Purchased Land and a Building