Allocating Payments and Receipts to Fixed Asset Accounts

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.

a.	Fee paid to attorney for title search	$3,200
b.	Cost of real estate acquired as a plant site: Land	340,700
	Building (to be demolished)	32,400
c.	Delinquent real estate taxes on property, assumed by purchaser	19,200
d.	Cost of tearing down and removing building acquired in (b)	5,400
e.	Proceeds from sale of salvage materials from old building	3,200*
f.	Special assessment paid to city for extension of water main to the property	12,800
g.	Architects and engineers fees for plans and supervision	46,800
h.	Premium on one-year insurance policy during construction	4,500
i.	Cost of filling and grading land	18,700
j.	Money borrowed to pay building contractor	799,000*
k.	Cost of repairing windstorm damage during construction	5,900
l.	Cost of paving parking lot to be used by customers	16,200
m.	Cost of trees and shrubbery planted	9,600
n.	Cost of floodlights installed on parking lot	1,100
o.	Cost of repairing vandalism damage during construction	2,600
p.	Proceeds from insurance company for windstorm and vandalism damage	6,400*
q.	Payment to building contractor for new building	851,800
r.	Interest incurred on building loan during construction	40,000
s.	Refund of premium on insurance policy (h) canceled after 11 months	375*

Required:

1. Assign each payment and receipt to Land (unlimited life), Land Improvements (limited life), Building, or Other Accounts. Choose the correct account from the dropdown list for each letter and enter the appropriate amount. Enter receipts as negative amounts using the minus sign.

Item	Account	Amount
a.	Land	$fill in the blank 2
b.	Land	$fill in the blank 4
c.	Land	$fill in the blank 6
d.	Land	$fill in the blank 8
e.	Land	$fill in the blank 10
f.	Land	$fill in the blank 12
g.	Building	$fill in the blank 14
h.	Building	$fill in the blank 16
i.	Land	$fill in the blank 18
j.	Other Accounts	$fill in the blank 20
k.	Other Accounts	$fill in the blank 22
l.	Land Improvements	$fill in the blank 24
m.	Land Improvements	$fill in the blank 26
n.	Land Improvements	$fill in the blank 28
o.	Other Accounts	$fill in the blank 30
p.	Other Accounts	$fill in the blank 32
q.	Building	$fill in the blank 34
r.	Building	$fill in the blank 36
s.	Building	$fill in the blank 38

2. Determine the amount debited to Land, Land Improvements, and Building.

Land	Land Improvements	Building
$fill in the blank 39	$fill in the blank 40	$fill in the blank 41

3. Since land used as a plant site does not lose its ability to provide services, it is not depreciated. Land improvements do lose their ability to provide services as time passes and are, therefore, depreciated .

4. What would be the effect on the current years income statement and balance sheet if the cost of filling and grading land of $18,700 [payment (i)] was incorrectly classified as Land Improvements rather than Land? Assume that Land Improvements are depreciated over a 20-year life using the double-declining-balance method.

Depreciation expense would be overstated & Land improvements would be overstated.