Question

The following payments and receipts are related to land, land improvements, and buildings acquired for use in a wholesale apparel business. The receipts are identified by an asterisk.
a. Finder’s fee paid to real estate agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 7,500
b. Cost of real estate acquired as a plant site: Land . . . . . . . . . . . . . . . . . . . . . . . . 210,000
Building . . . . . . . . . . . . . . . . . . . . . 50,000
c. Fee paid to attorney for title search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500
d. Delinquent real estate taxes on property, assumed by purchaser . . . . . . . . . . . . 20,650
e. Cost of razing and removing building . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,250
f. Cost of filling and grading land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,500
g. Proceeds from sale of salvage materials from old building . . . . . . . . . . . . . . . . 5,000*
h. Architect’s and engineer’s fees for plans and supervision . . . . . . . . . . . . . . . . . 36,000
i. Special assessment paid to city for extension of water main to the
property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000
j. Premium on one-year insurance policy during construction . . . . . . . . . . . . . . . . 3,600
k. Money borrowed to pay building contractor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 900,000*
l. Cost of trees and shrubbery planted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,000
m.Cost of repairing windstorm damage during construction . . . . . . . . . . . . . . . . . . 3,000
n. Cost of repairing vandalism damage during construction . . . . . . . . . . . . . . . . . . . 4,200
o. Cost of paving parking lot to be used by customers . . . . . . . . . . . . . . . . . . . . . . . 15,000
p. Proceeds from insurance company for windstorm and vandalism
damage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000*
q. Interest incurred on building loan during construction . . . . . . . . . . . . . . . . . . . . . 54,000
r. Payment to building contractor for new building . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000
s. Refund of premium on insurance policy (j) canceled after 10 months . . . . . . . . 600*

Instructions
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:


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 ofdepreciation.


$1.99
Sales2
Views281
Comments0
  • CreatedJuly 17, 2012
  • Files Included
Post your question
5000