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$2,000 b.Cost of real estate acquired as a plant site: Land285,000 Building (to be demolished)60,000 c.Delinquent real estate taxes on property, assumed by purchaser16,000 d.Cost of razing and removing building acquired in (b)5,000 e.Proceeds from sale of salvage materials from old building3,000* f.Special assessment paid to city for extension of water main to the property30,000 g.Architects and engineers fees for plans and supervision70,000 h.Premium on one-year insurance policy during construction7,000 i.Cost of filling and grading land11,000 j.Money borrowed to pay building contractor800,000* k.Cost of repairing windstorm damage during construction6,000 l.Cost of paving parking lot to be used by customers32,000 m.Cost of trees and shrubbery planted10,000 n.Cost of floodlights installed on parking lot1,000 o.Cost of repairing vandalism damage during construction2,000 p.Proceeds from insurance company for windstorm and vandalism damage7,500* q.Payment to building contractor for new building700,000 r.Interest incurred on building loan during construction35,000 s.Refund of premium on insurance policy (h) canceled after 11 months400*

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.

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

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

LandLand ImprovementsBuilding$fill in the blank 39$fill in the blank 40$fill in the blank 41

3. Land used as a plant site

doesdoes not

lose its ability to provide services; thus, it

isis not

depreciated. However, land improvements

dodo not

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

not depreciateddepreciated

.

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 doubledeclining- 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.