Long-term asset costs and partial year depreciation

(Learning Objectives 2 & 3) 20–25 min.

Prescott Manufacturing incurred the following costs in acquiring land, making land improvements, and constructing and furnishing a new building.

a. Purchase price of four acres of land..............................................................

b. Additional dirt and earthmoving ....................................................................

c. Fence around the boundary of the property...................................................

d. Attorney fee for title search on the land.........................................................

e. Unpaid property taxes on the land to be paid by Prescott .............................

f. Company signs at the front of the property...................................................

g. Building permit for the building.....................................................................

h. Architect’s fee for the design of the building .................................................

i. Labor to construct the building .....................................................................

j. Materials used to construct the building .......................................................

k. Landscaping..................................................................................................

l. Parking lot and concrete walks......................................................................

m. Lights for the parking lot and walkways ........................................................

n. Salary of construction supervisor (85% to building;

15% to parking lot and concrete walks) ........................................................

o. Furniture for the building...............................................................................

p. Transportation and installation of furniture ...................................................

$210,000 9,300 14,000 1,400 6,700 11,400 2,900 26,000 414,000 377,000 9,300 34,600 8,700 30,000 63,000 1,200 Prescott Manufacturing depreciates buildings over 40 years, land improvements over 15 years, and furniture over eight 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 November 1.

Record partial-year depreciation for the year ended December 31. Round intermediate calculations to the nearest cent and final answers to the nearest whole dollar.

AppendixLO1