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	$2,500
b.	Cost of real estate acquired as a plant site: Land	285,000
	Building (to be demolished)	60,000
c.	Delinquent real estate taxes on property, assumed by purchaser	15,500
d.	Cost of razing and removing building acquired in (b)	6,000
e.	Proceeds from sale of salvage materials from old building	3,000	*
f.	Special assessment paid to city for extension of water main to the property	29,000
g.	Architects and engineers fees for plans and supervision	70,000
h.	Premium on one-year insurance policy during construction	6,000
i.	Cost of filling and grading land	11,000
j.	Money borrowed to pay building contractor	800,000	*
k.	Cost of repairing windstorm damage during construction	6,000
l.	Cost of paving parking lot to be used by customers	31,000
m.	Cost of trees and shrubbery planted	10,000
n.	Cost of floodlights installed on parking lot	2,000
o.	Cost of repairing vandalism damage during construction	2,500
p.	Proceeds from insurance company for windstorm and vandalism damage	7,000	*
q.	Payment to building contractor for new building	900,000
r.	Interest incurred on building loan during construction	35,000
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. 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/Land Improvements/Building/Other Accounts	$fill in the blank 2
b.	Land/Land Improvements/Building/Other Accounts	$fill in the blank 4
c.	Land/Land Improvements/Building/Other Accounts	$fill in the blank 6
d.	Land/Land Improvements/Building/Other Accounts	$fill in the blank 8
e.	Land/Land Improvements/Building/Other Accounts	$fill in the blank 10
f.	Land/Land Improvements/Building/Other Accounts	$fill in the blank 12
g.	Land/Land Improvements/Building/Other Accounts	$fill in the blank 14
h.	Land/Land Improvements/Building/Other Accounts	$fill in the blank 16
i.	Land/Land Improvements/Building/Other Accounts	$fill in the blank 18
j.	Land/Land Improvements/Building/Other Accounts	$fill in the blank 20
k.	Land/Land Improvements/Building/Other Accounts	$fill in the blank 22
l.	Land/Land Improvements/Building/Other Accounts	$fill in the blank 24
m.	Land/Land Improvements/Building/Other Accounts	$fill in the blank 26
n.	Land/Land Improvements/Building/Other Accounts	$fill in the blank 28
o.	Land/Land Improvements/Building/Other Accounts	$fill in the blank 30
p.	Land/Land Improvements/Building/Other Accounts	$fill in the blank 32
q.	Land/Land Improvements/Building/Other Accounts	$fill in the blank 34
r.	Land/Land Improvements/Building/Other Accounts	$fill in the blank 36
s.	Land/Land Improvements/Building/Other Accounts	$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. Land used as a plant site

does/does not

lose its ability to provide services; thus, it

is/is not

depreciated. However, land improvements

do/do not

lose their ability to provide services as time passes and are, therefore,

not depreciated/depreciated

.

4. What would be the effect on the income statement and balance sheet if the cost of filling and grading land of $11,000 [payment (i)] 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.

Depreciation expense would be overstated, land would be understated, and net income would be understated./

Depreciation expense would be overstated, land improvements would be overstated and net income would be overstated.