Assume Milne's Moving & Storage Ltd. (MMS) of Regina, Saskatchewan, incurred the following costs in acquiring land, making land improvements, and constructing and furnishing its own storage warehouse:

a. Purchase price of 4 acres of land, including an old building that will be used for an office (land fair value is $320,000, building fair value is $80,000) .........................................$350,000

b. Landscaping (additional dirt and earth moving) ............................................... 8,100

c. Fence around the land ........................................................................................ 31,600

d. Lawyer fee for title search on the land ................................................................ 1,000

e. Delinquent real estate taxes on the land to be paid by MMS................................ 7,500

f. Company signs at front of the company property ................................................ 3,400

g. Building permit for the warehouse ...................................................................... 1,500

h. Architect fee for the design of the warehouse ..................................................... 24,500

i. Masonry, carpentry, roofing, and other labour to construct the warehouse ........ 920,000

j. Renovation of the office building ........................................................................ 50,200

k. Interest cost on construction loan for warehouse ................................................. 9,700

l. Landscaping (trees and shrubs) .............................................................................. 8,200

m. Parking lot, concrete walks, and lights on the property ....................................... 57,600

n. Concrete, wood, and other materials used in the construction of the warehouse. 234,300

o. Supervisory salary of construction supervisor (85% to warehouse, 5% to

land improvements, 10% to office building) ............................................................. 60,000

p. Office furniture ............................................................................................. 115,700

q. Transportation and installation of furniture ................................................... 2,300

Assume MMS depreciates buildings over 40 years, land improvements over 20 years, and furniture over 8 years, all on a straight-line basis with zero residual value.

Requirements

1. Set up columns for Land, Land Improvements, Warehouse, Office Building, and Furniture. Show how to account for each of MMS's costs by listing the cost under the correct account. Determine the total cost of each asset.

2. Assuming that all construction was complete and the assets were placed in service on September 1, 2014, record depreciation for the year ended December 31, 2014. Round to the nearest dollar.

3. Identify the management issues included in this problem and what effect they have on business operations.