In this example, the transactions associated with recording the cost of improvements are displayed. The steps followed in this example can also be applied when a new asset is constructed in-house. We use fixed asset FIXMACHINE for this example. It is assumed that the fixed asset ID has been created using the Enter Fixed Assets screen. The asset MACHINE was refurbished by employee Ed Jones who is paid $7.00 per hour. It took Jones 40 hours to do the job. The following items from inventory were used in refurbishing MACHINE:
Product Cost Units
belt 2.00 3
screws 0.05 9
widgets 7.00 5
The following steps are performed:
In the Payroll System, enter the labor hours for Jones.
In the Payroll System, calculate payroll.
In the Inventory Control System, credit inventory and debit FIXMACHINE for the amount of inventory transferred.
First, the value of Jones' labor is added to FIXMACHINE. The screen below was accessed by selecting Labor Hours from the Data Entry, Payroll menu.
Notice that Jones' 40 hours of wages are expensed to FIXMACHINE. Refer to the C/Books Payroll Manual for more information on entering labor hours. When the payroll process Calculate Payroll is run from the Data Entry, Payroll menu, a voucher is created which debits the fixed asset for the dollar amount in the Actual Amount field.
The inventory products that were used in refurbishing MACHINE must be decreased in inventory and their value must be added to FIXMACHINE. This is done through use of the inventory adjustment screen. The screen below was accessed by selecting Inventory Adjustments from the Data Entry, Inventory menu.
Notice that the Units field in the debit entry to FIXMACHINE is zero. This is because units in the Inventory Control System refer to the number of items of inventory. Since we are not dealing with units in the Fixed Assets System, zero is entered into the Units field. This screen only requires that the debit and credit amounts be equal; it is not concerned with balancing the entries for Units.
Another way to charge payroll costs or inventory items to a fixed asset is to accumulate these costs using the Job Costing System, and upon completion of the job, transfer the costs to the fixed asset. This procedure could be used for repairing an asset or even building an asset from scratch. See the C/Books Job Costing Manual for specific instructions on charging cost to a job activity. Once all the costs have been accumulated to the job number, the way to transfer these costs is with the use of a general journal entry. Keep in mind that if you use multiple activity numbers for such a job, you need a separate general journal line entry for each activity and amount. An example of such a transfer might appear as follows:
The proper procedure for such a transfer is to first close the job and then enter the general journal entry for the transfer. Both the closing of the job and the general journal entry should be made in the same accounting period for proper offset and transfer of the costs.