The following payments and receipts are related to land, land improvements, and buildings acquired for use in

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,000
b. Cost of real estate acquired as a plant site: Land . . . . . . . . . . . . . . . . . . . . 100,000
Building . . . . . . . . . . . . . . . . . 60,000
c. Fee paid to attorney for title search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,500
d. Delinquent real estate taxes on property, assumed by purchaser . . . . . . . . 17,500
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 . . . . . . . . . . . . 4,500*
h. Special assessment paid to city for extension of water main to the
property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,000
i. Premium on 1-year insurance policy during construction . . . . . . . . . . . . . 7,200
j. Architect€™s and engineer€™s fees for plans and supervision . . . . . . . . . . . . . 50,000
k. Cost of repairing windstorm damage during construction . . . . . . . . . . . . 2,500
l. Cost of repairing vandalism damage during construction . . . . . . . . . . . . . 1,800
m. Cost of trees and shrubbery planted . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,000
n. Cost of paving parking lot to be used by customers . . . . . . . . . . . . . . . . 18,500
o. Proceeds from insurance company for windstorm and vandalism
damage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000*
p. Interest incurred on building loan during construction . . . . . . . . . . . . . . 65,000
q. Money borrowed to pay building contractor . . . . . . . . . . . . . . . . . . . . . 1,000,000*
r. Payment to building contractor for new building . . . . . . . . . . . . . . . . . . 1,250,000
s. Refund of premium on insurance policy (i) canceled after 10 months . . 1,200*

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:

The following payments and receipts are related to land, land 148097

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.

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Accounting

ISBN: 978-0324188004

21st Edition

Authors: Carl s. warren, James m. reeve, Philip e. fess

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