Instructions 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 next to the item letter. a. Fee paid to attorney for title search $2,500 b. Cost of real estate acquired as a plant site: Land 285,000 Cost of real estate acquired as a plant site: Building (to be demolished) 55,000 C. Delinquent real estate taxes on property, assumed by purchaser 15,500 d. Cost of razing and removing building acquired in B 5,000 0. Proceeds from sale of salvage materials from old building 4,000 f. Special assessment paid to city for extension of water main to the property 29,000 9. Architect's and engineer's fees for plans and supervision 60,000 h. Premium on one-year insurance policy during construction 6,000 L Cost of filling and grading land 12,000 Money borrowed to pay building contractor 900,000 k Cost of repairing windstorm damage during construction 5,500 L Cost of paving parking lot to be used by customers 32,000 11,000 m. Cost of trees and shrubbery planted n. Cost of floodlights installed on parking lot 2,000 0. Cost of repairing vandalism damage during construction 2,500 p." Proceeds from insurance company for windstorm and vandalism damage 7,500 800,000 q Payment to building contractor for new building 34,500 f. Interest incurred on building loan during construction S. Refund of premium on insurance policy (h) canceled after 11 months 500 Instructions Allocation to Fixed Asset Accounts Final Questions Allocation to Fixed Asset Accounts 1. Assign each payment and receipt to Land (unlimited life), Land Improvements (limited life), Building, or Other Accounts in the table provided. Enter receipts as negative amounts using the minus sign. 2. Determine the amount debited to Land, Land Improvements, and Building. Allocation to Fixed Asset Accounts 1 Item Land 2 a. 3 b. 4 C. 5 d. 6 e. 7 f. 8 9. 9 10 13 11 12 13 14 h. i. j. k. m. 15 Land Improvements Building Other Accounts Instructions Allocation to Fixed Asset Accounts Final Questions Allocation to Fixed Asset Accounts Item Land Land Building Other Accounts Improvements 2 a. 3 b. 4 5 c. d. 6 e. 7 f. 8 9 10 11 12 15 15 16 14 15 9. h. i. j. k L m. n. P 16 12 17 18 19 61 0. P. 9. 20 21 T. S. Debited amounts Final Questions 3. The costs assigned to the land, which is used as a plant site, will not be depreciated, while the costs assigned to land improvements will be depreciated. Explain this seemingly contradictory application of the concept of depreciation. Since land used as a plant site as time passes and are therefore lose its ability to provide services, it depreciated. Land improvements lose their ability to provide services 4. What would be the effect on the income statement and balance sheet if the cost of filling and grading land of $12,000 [payment ()] 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. The effect would be that: Land Improvements would be understated & Depreciation expense would be overstated. Retained Earnings would be understated & Depreciation expense would be overstated. Depreciation expense would be overstated & Land would be overstated. O Depreciation expense would be understated & Land improvements would be overstated. O Depreciation expense would be understated & Net income would be understated