Chapter 10 1. PR.10.01 ALGO 2. PR.10.02.ALGO eBook 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 b. Cost of real estate acquired as a plant site: Land $3,700 394,300 Building (to be demolished) 37,500 c. Delinquent real estate taxes on property, assumed by purchaser 22,200 Cost of tearing down and removing building acquired in (b) 6,200 e. Proceeds from sale of salvage materials from old building 3,700* f. Special assessment paid to city for extension of water main to the property 14,800 9. Architect's and engineer's fees for plans and supervision 54,200 Premium on one-year insurance policy during construction 5,200 i. Cost of filling and grading land 21,700 J. Money borrowed to pay building contractor 924,600* k. Cost of repairing windstorm damage during construction 1. Cost of paving parking lot to be used by customers 6,800 18,700 m. Cost of trees and shrubbery planted 11,100 n. Cost of floodlights installed on parking lot 1,300 0. Cost of repairing vandalism damage during construction 3,100 p. Proceeds from insurance company for windstorm and vandalism damage 7,400 9. Payment to building contractor for new building 985,700 1. Interest incurred on building loan during construction 46,300 5. Refund of premium on insurance policy (h) canceled after 11 months 433* 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.. Chapter 10 1. PR.10.01 ALGO 2. PR.10.02.ALGO eBook 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 2,500 x b. Land 340,000 x Land 15,500 x d. Land e. Land r. Land 9. Building h. Building i. Land J- Other Accounts Other Accounts Land Improvements m. Land Improvements Land Improvements 0. Other Accounts P- Other Accounts 9- Building 1. Building S. Building 2. Determine the amount debited to Land, Land Improvements, and Building. Land Land Improvements Building 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 Chapter 10 1. PR.10.01 ALGO 2. PR.10.02. ALGO eBook Show Me How Comparing Three Depreciation Methods Dexter Industries purchased packaging equipment on January 8 for $512,400. The equipment was expected to have a useful life of four years, or 10,000 operating hours, and a residual value of $42,400. The equipment was used for 3,500 hours during Year 1,2,100 hours in Year 2, 2,800 hours in Year 3, and 1,600 hours in Year 4. Required: 1. Determine the amount of depreciation expense for the four years ending December 31 by (a) the straight-line method, (b) the units-of-activity method, and (c) the double-declining-balance method. Also determine the total depreciation expense for the four years by each method. Round the answer for each year to the nearest whole dollar. Depreciation Expense Units-of-Activity Method Double-Declining- Balance Method 22,500 x 28,500 x Year Straight-Line Method Year 1 Year 2 Year 3 Year 4 Total 2. What method yields the highest depreciation expense for Year 1? Double-declining-balance method 3. What method yields the most depreciation over the four-year life of the equipment? All three depreciation methods Foodback Check My Work Asset cost minus residual value equals depreciable cost. Sum the yearly depreciation to determine total depreciation. Annual units-of-production depreciation allocates the cost of the asset equally over the units produced (hours). The double-dedining rate is two times the straight-line rate. Book value is the asset cost minus accumulated depreciation. In the first year, the balance in the accumulated depreciation account is zero. Compare the total depreciation for all methods over the time period. Recall that straight-line depreciation allocates the depreciable cost of the asset equally over the period of use, while double-declining method is an accelerated method