Allocating payments and receipts to fixed asset accounts Instructions Allocation to Fixed Asset Accounts Final Questions x Instructions The following payments and receipts are related to land land improvements and buildings acquired for use in a wholesale ceramic business The receipts are identified by an asterisk next to the item letter 5 2.500 a b 285,000 55.000 15,500 Fee paid to attorney for title search Cost of real estate acquired as a plant site Land a Cost of real estate acquired as a plant site Building (to be demolished Delinquent real estate taxes on property, assumed by purchaser Cost of razing and removing building acquired in B Proceeds from sale of salvage materials from old building Special assessment paid to city for extension of water main to the property Architect's and engineer's fees for plans and supervision Premium on one-year insurance policy during construction 5,000 d 4,000 29,000 f 60.000 9 6,000 h 12,000 Cost of filling and grading land 900.000 Money borrowed to pay building contractor Cost of repairing windstorm damage during construction 5,500 k 1 32,000 Cost of paving parking lot to be used by customers 11.000 Cost of trees and shrubbery planted m 2 000 2.500 G 0 7500 Cost of floodlights installed on parking lol Cost of repairing vandalism damage during construction Proceeds from insurance company for windstorm and vandalism damage Payment to building contractor for new building Interest incurred on building loan during construction Refund of premium on insurance policy th) canceled after 11 months 800,000 a 34 500 500 Required: Assign each payment and receipt to Land (unlimited life), Land Improvements limited life) Building, or Other Accounts in the table provided Enter receipts as negative amounts wing the minus sign Check My Work k Cost of repairing windstorm damage during construction 5.500 1 Cost of paving parking lot to be used by customers 32,000 m Cost of trees and shrubbery planted 11,000 2,000 Cost of floodlights installed on parking lot Cost of repairing vandalism damage during construction O 2,500 . Proceeds from insurance company for windstorm and vandalism damage 7.500 9 Payment to building contractor for new building 800,000 T. Interest incurred on building loan during construction 34,500 S. Refund of premium on insurance policy (h) canceled after 11 months 500 Required: 1 Assign each payment and receipt to Land (unlimited life), Land Improvements (limited life), Building, or Other Accounts in the table provided. Enter receipts as negative amounts using the minus sign 2. Determine the amount debited to Land, Land Improvements, and Building 3. The costs assigned to the land, which is used as a plant site, will not be depreciated while the costs assigned to land improvements will be depreciated. Explain this seemingly contradictory application of the concept of depreciation 4. What would be the effect on the income statement and balance sheet if the cost of filling and grading land of $12,000 (payment was incorrectly classified as Land Improvements rather than Land? Assume Land Improvements are depreciated over a 20-year life using the double-declining-balance method Check My Work All work saved. Allocation to Fixed Asset Accounts 1. Assign each payment and receipt to Land (unlimited life), Land Improvements (limited life), Building, or Other Accounts in the table provided Enter receipts as negative amounts using the minus sign. 2 Determine the amount debited to Land Land Improvements, and Building Allocation to Fixed Asset Accounts Land Item Land Building Other Accounts Improvements 2 a 3 b 4 5 d 6 e 7 f. 2 ch 9 h 10 1 j. 12 K. 13 - m. 15 n e. 7 f. 8 9. 9 h. 10 i 11 1. 12 k 13 L 14 m. 15 16 0 P. 16 9. 19 20 5 21 Debited amounts Final Questions 3. The costs assigned to the land, which is used as a plant site, will not be depreciated while the costs assigned to land improvements will be depreciated Explain this seemingly contradictory application of the concept of depreciation Since land used as a plant site v lose its ability to provide services, it V depreciated. Land improvements lose their ability to provide services as time passes and are therefore 4 What would be the effect on the income statement and balance sheet if the cost of filling and grading land of $12,000 (payment (0) was incorrectly classified as Land Improvements rather than Land? Assume Land Improvements are depreciated over a 20-year life using the double-dechnino-balance method The effect would be that O Land Improvements would be understated & Depreciation expense would be overslated Depreciation expense would be understated & Land improvements would be overstated Depreciation expense would be understated & Net income would be understated Retained Earings would be understated & Depreciation expense would be overstated Depreciation expense would be overstated & Land would be overstated Check My Work