Drive and Fly, near an airport, incurred the following costs to acquire land, make land improvements, and
Question:
Drive and Fly depreciates land improvements over 20 years, buildings over 40 years, and furniture over 10 years, all on a straight-line basis with zero residual value.
Requirements
1. Set up columns for Land, Land Improvements, Building, and Furniture. Show how to account for each cost by listing the cost under the correct account. Determine the total cost of each asset.
2. All construction was complete and the assets were placed in service on July 1.
Record partial-year depreciation for the year ended December31.
a. Purchase price of three acres of land b. Delinquent real estate taxes on the land to be paid $ 80,000 by Drive and Fly c. Additional dirt and earthmoving d. Title insuranoce on the land acquisition c. Fence around the boundary of the property f. Building permit for the building .. g. Architect's fee for the design of the building . h. Signs near the front of the property i. Materials used to construct the building.. j. Labor to construct the building. k. Interest cost on construction loan for the building. I. Parking lots on the property m. Lights for the parking lots n. Salary of construction supervisor (80% to building; 20% to parking lot and concrete walks) 5,600 9,000 3,200 9,100 500 20,700 9,000 215,000 173,000 9,500 29,000 11,300 80,000 o. Furniture... p. Transportation of furniture from seller to the building. q. Landscaping (shrubs) 11,600 2,200 6,300
Step by Step Answer:
Req 1 Item Land Land Improvements Building Furniture a 80000 b 5600 ...View the full answer
Financial and Managerial Accounting
ISBN: 978-0132497978
3rd Edition
Authors: Horngren, Harrison, Oliver
Related Video
In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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