c

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	$2,700
b.	Cost of real estate acquired as a plant site: Land	288,400
	Building (to be demolished)	27,400
c.	Delinquent real estate taxes on property, assumed by purchaser	16,200
d.	Cost of tearing down and removing building acquired in (b)	4,500
e.	Proceeds from sale of salvage materials from old building	2,700*
f.	Special assessment paid to city for extension of water main to the property	10,800
g.	Architects and engineers fees for plans and supervision	39,700
h.	Premium on one-year insurance policy during construction	3,800
i.	Cost of filling and grading land	15,900
j.	Money borrowed to pay building contractor	676,300*
k.	Cost of repairing windstorm damage during construction	5,000
l.	Cost of paving parking lot to be used by customers	13,700
m.	Cost of trees and shrubbery planted	8,100
n.	Cost of floodlights installed on parking lot	900
o.	Cost of repairing vandalism damage during construction	2,200
p.	Proceeds from insurance company for windstorm and vandalism damage	5,400*
q.	Payment to building contractor for new building	721,000
r.	Interest incurred on building loan during construction	33,900
s.	Refund of premium on insurance policy (h) canceled after 11 months	317*

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

doesdoes not

lose its ability to provide services, it

isis not

depreciated. Land improvements

dodo not

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

depreciatednot 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 $15,900 [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.Depreciation expense would be overstated & Land would be overstated.Depreciation expense would be understated & Land improvements would be overstated.Land would be overstated & Net income would be understated.