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.
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 of depreciation.
4. What would be the effect on the income statement and balance sheet if the cost of paving the parking lot of $21,600 [payment (o)] was incorrectly classified as Land rather than Land Improvements? Assume Land Improvements are depreciated over a 10-year life using the doubledeclining-balance method.
Balance SheetBalance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Step by Step Answer:
Forensic And Investigative Accounting
ISBN: 9780808056300
10th Edition
Authors: G. Stevenson Smith D. Larry Crumbley, Edmund D. Fenton