The following payments and receipts are related to land, land improvements, and buildings acquired for use in a wholesale apparel business. The receipts are identified by an asterisk.

a.Fee paid to attorney for title search 3,600

b.Cost of real estate acquired as a plant site: Land 720,000 Cost of real estate acquired as a plant site: Building 60,000

c.Finders fee paid to real estate agency 23,400

d.Delinquent real estate taxes on property, assumed by purchaser 15,000

e.Architects and engineers fees for plans and supervision 75,000

f.Cost of removing building purchased with land in (b)10,000

g.Proceeds from sale of salvage materials from old building 3,400*

h.Cost of filling and grading land18,000

i.Premium on one-year insurance policy during construction 8,400

j.Money borrowed to pay building contractor 800,000*

k.Special assessment paid to city for extension of water main to the property13,400

l.Cost of repairing windstorm damage during construction 3,000

m.Cost of repairing vandalism damage during construction 2,000

n.Cost of trees and shrubbery planted14,000

o.Cost of paving parking lot to be used by customers 21,600

p.Interest incurred on building loan during construction 40,000

q.Proceeds from insurance company for windstorm and vandalism damage 4,500*

r.Payment to building contractor for new building 800,000

s.Refund of premium on insurance policy (i) canceled after 10 months1,400*

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 paving the parking lot of $21,600 [payment (o)] was incorrectly classified as Land rather than Land Improvements? Assume Land Improvements are depreciated over a 10-year life using the double-declining-balance method.

5.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.

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

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 i

14 m

15 n

16 o

17 p

18 q

19 r

20 s

21 Debited amounts