Stefano Distributors incurred the following costs in acquiring land and a building, making land improvements, and constructing and furnishing an office building for its own use:
a. Purchase price of 2 hectares of land, including an old building that will be used for storage of maintenance equipment (land appraised market value is $1,300,000; building appraised market value is $300,000) ..................................................................................$1,150,000
b. Real estate taxes in arrears on the land to be paid by Stefano Distributors ............6,000
c. Additional dirt and earth moving.............................................................6,000
d. Legal fees on the land acquisition............................................................4,500
e. Fence around the boundary of the land.....................................................70,000
f. Building permit for the office building.......................................................1,000
g. Architect fee for the design of the office building.......................................40,000
h. Company signs near front and rear approaches to the company property.............14,000
i. Renovation of the storage building.........................................................150,000
j. Concrete, wood, steel girders, and other materials used in the
construction of the office building............................................................700,000
k. Masonry, carpentry, roofing, and other labour to construct the office building.....550,000
l. Parking lots and concrete walks on the property..........................................31,500
m. Lights for the parking lot, walkways, and company signs..............................12,500
n. Salary of construction supervisor (90 percent to office building
and 10 percent to storage building)..........................................................100,000
o. Office furniture for the office building...................................................125,000
p. Transportation of furniture from seller to the office building............................2,000
Stefano Distributors amortizes buildings over 40 years, land improvements over 20 years, and furniture over 6 years, all on a straight-line basis with zero residual value.
Required
1. Set up columns (or T-accounts) for Land, Land Improvements, Office Building, Storage Building, and Furniture. Show how to account for each of Stefano'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 February 25, record amortization for the year ended December 31. Round figures to the nearest dollar.