P7-70B. (Learning Objectives 1, 2: Identifying the elements of a PPE’s cost) Assume Lance Pharmacy, Inc., opened an office in Valencia, Italy. Further assume that Lance Pharmacy incurred the following costs in acquiring land, making land improvements, and constructing and furnishing the new sales building:

Assume Lance Pharmacy depreciates buildings over 30 years, land improvements over 15 years, and furniture over eight years, all on a straight-line basis with zero residual value.
Requirements 1. Show how to account for each of Lance Pharmacy’s costs 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 May 2. Record depreciation for the year ended December 31. Round to the nearest dollar.
3. How will what you learned in this problem help you manage a business?

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a. Purchase price of land, including an old building that will be used for a garage (land market value is 310,000; building market value is 90,000).......... 320,000 b. Landscaping (additional dirt and earth moving).. 8,200 c. Fence around the land..... 32,000 d. Attorney fee for title search on the land. 300 e. Delinquent real estate taxes on the land to be paid by Lance Pharmacy. 5,800 f. Company signs at entrance to the property. 1,500 g. Building permit for the sales building. 800 h. Architect fee for the design of the sales building.. 19,800 i. Masonry, carpentry, and roofing of the sales building. 505,000 j. Renovation of the garage building... 41,800 k. Interest cost on construction loan for sales building. 9,400 1. Landscaping (trees and shrubs). 6,500 m. Parking lot and concrete walks on the property. 52,800 n. Lights for the parking lot and walkways....... 7,100 o. Salary of construction supervisor (86% to sales building; 10% to land improvements; and 4% to garage building renovations).. 40,000 p. Office furniture for the sales building...... 78,200 q. Transportation and installation of furniture.... 1,200