Becker Supply, Inc., opened an office in White Bear Lake, Minnesota. Becker incurred the following costs in acquiring land, making land improvements, and constructing and furnishing the new sales building:

The company depreciates buildings over 30 years, land improvements over 15 years, and furniture over 12 years, all on a straight-line basis with residual values of zero.

Requirements

1. Identify the proper account (Land, Land Improvements, Sales Building, Garage Building, or Furniture) for each of the costs listed in the problem. Calculate the total cost of each asset.

2. All construction was complete and the assets were placed in service on April 2. Record depreciation for the year ended December 31. Round to the nearest dollar.

3. Why would a manager need to understand the concepts covered in this problem?

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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).. b. Grading (leveling) land.. c. Fence around the land... d. Attorney fee for title search on the land . e. Delinquent real estate taxes on the land to be paid by Becker Supply.. f. Company signs at entrance to the property g. Building permit for the sales building . h. Architect fee for the design of the sales building.. i. Masonry, carpentry, and roofing of the sales building.. j. Renovation of the garage building . k. Interest cost on construction loan for sales building. 1. Landscaping (trees and shrubs). m. Parking lot and concrete walks on the property n. Lights for the parking lot and walkways. o. Salary of construction supervisor (84% to sales building; 10% to land improvements; and 6% to garage building renovations).. p. Office furniture for the sales building.. q. Transportation and installation of furniture.. $340,000 8,800 31,400 1,100 5,800 1,900 700 87,800 518,000 37,100 9,900 6,100 52,200 7,500 40,000 79,000 1,000