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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
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 | $ 2,725 |
b. | Cost of real estate acquired as a plant site: Land | 280,900 |
Cost of real estate acquired as a plant site: Building | 52,000 | |
c. | Delinquent real estate taxes on property, assumed by purchaser | 14,910 |
d. | Cost of razing and removing building | 4,855 |
e.* | Proceeds from sale of salvage materials from old building | 3,880 |
f. | Special assessment paid to city for extension of water main to the property | 27,745 |
g. | Architects and engineers fees for plans and supervision | 61,390 |
h. | Premium on one-year insurance policy during construction | 6,600 |
i. | Cost of filling and grading land | 12,600 |
j.* | Money borrowed to pay building contractor | 972,000 |
k. | Cost of repairing windstorm damage during construction | 5,095 |
l. | Cost of paving parking lot to be used by customers | 30,230 |
m. | Cost of trees and shrubbery planted | 11,660 |
n. | Cost of floodlights installed on parking lot | 2,150 |
o. | Cost of repairing vandalism damage during construction | 2,335 |
p.* | Proceeds from insurance company for windstorm and vandalism damage | 6,830 |
q. | Payment to building contractor for new building | 861,000 |
r. | Interest incurred on building loan during construction | 32,110 |
s.* | Refund of premium on insurance policy (h) canceled after 11 months | 540 |
Required: | |
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. |
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. |
4. | What would be the effect on the income statement and balance sheet if the cost of filling and grading land of $12,600 [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. |
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Allocation to Fixed Asset Accounts
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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. |
Question not attempted.
Score: 0/145
Allocation to Fixed Asset Accounts |
1 | Item | Land | Land Improvements | Building | Other Accounts |
2 | a. | ||||
3 | b. | ||||
4 | c. | ||||
5 | d. | ||||
6 | e. | ||||
7 | f. | ||||
8 | g. | ||||
9 | h. | ||||
10 | i. | ||||
11 | j. | ||||
12 | k. | ||||
13 | l. | ||||
14 | m. | ||||
15 | n. | ||||
16 | o. | ||||
17 | p. | ||||
18 | q. | ||||
19 | r. | ||||
20 | s. | ||||
21 | Debited amounts |
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