Question: The following payments and receipts are related to land land 120258

The following payments and receipts are related to land, land improvements, and buildings acquired for use in a wholesale ceramic business. The receipts are identified by an asterisk.
a. Fee paid to attorney for title search $ 2,500
b. Cost of real estate acquired as a plant site: Land 150,000
Building 40,000
c. Delinquent real estate taxes on property, assumed by purchaser 13,750
d. Cost of razing and removing building 4,800
e. Special assessment paid to city for extension of water main to the property 10,200
f. Proceeds from sale of salvage materials from old building 5,000*
g. Cost of filling and grading land 29,700
h. Premium on one-year insurance policy during construction 6,600
i. Cost of repairing windstorm damage during construction 3,500
j. Cost of paving parking lot to be used by customers 12,500
k. Cost of trees and shrubbery planted 7,000
l. Architect’s and engineer’s fees for plans and supervision 75,000
m. Cost of repairing vandalism damage during construction 1,600
n. Interest incurred on building loan during construction 30,000
o. Cost of floodlights installed on parking lot 8,500
p. Money borrowed to pay building contractor 500,000*
q. Payment to building contractor for new building 750,000
r. Proceeds from insurance company for windstorm and vandalism damage 4,000*
s. Refund of premium on insurance policy (h) canceled after 11 months 550*

1. Assign each payment and receipt to Land (unlimited life), Land Improvements (limited life), Building, or Other Accounts. Indicate receipts by an asterisk. Identify each item by letter and list the amounts in columnar form, as follows:
Land Other
Item Land Improvements Building Accounts

2. Determine the amount debited to Land, Land Improvements, and Building.
3. The costs assigned to the land, which is used as a plant site, will not be depreciated, while the costs assigned to land improvements will be depreciated. Explain this seemingly contradictory application of the concept of depreciation.

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  • CreatedMay 29, 2012
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