Problem 26-10 (AICPA Adapted)At the beginning of the current year, Rock Company reported2. What is the cost of new building?the following balances:LandBuildingDuring the current year, the following transactions occurre i:2,200,0006,500,000A piece of land was acquired for P1,600,000.To be able to acquire the land, P175,000 was paid to areal estate agent, and P50,000 was incurred to clear theland.During the course of clearing the land, timber andgravel were recovered and sold for P25,000.* A second piece of land with a building was acquired forP4,500,000.The appraiser valued the land at P2,000,000 and thebuilding at P1,000,000.Shortly after acquisition, the building was demolished ata cost of P100,000.A new building was constructed at a cost of P5,000,000plus excavation fee P50,000, architect fee P80,000 andbuilding permit P70,000.*A third piece of land was acquired for P2,000,000 and washeld for undetermined use.1. What total cost of land should be reported in thestatement of financial position under property, plantand equipment?a. 8,500,000b. 7,000,000с. 7,100,000d. 8,600,000а. 5,200,000b. 5,300,000c. 6,800,000d. 6,700,000CS Scanned with CamScanner

Calculation of cost of land reported as well as cost of new building are as follows

2. What is the cost of new building? statement of financial position under property, plant and equipment? 1. What total cost of land should be reported in the a. 8,500,000 b. 7,000,000 c. 7,100,000 d. 8,600,000 2. What is the cost of new building? a. 5,200,000

2. What is the cost of new building? statement of financial position under property, plant and equipment? 1. What total cost of land should be reported in the a. 8,500,000 b. 7,000,000 c. 7,100,000 d. 8,600,000 2. What is the cost of new building? a. 5,200,000

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter4: Balance Sheet: Presenting And Analyzing Resources And Financing

Section: Chapter Questions

Problem 7Q

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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 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 Building (to be demolished)........... 60,000 C. Finder's fee paid to real estate agency.......................................... 23,400 D. Delinquent real estate taxes on property, assumed by purchaser................. 15,000 E. Architect's and engineer's fees for plans for new building....................... 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 land................................................ 18,000 1. 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 property....... 13,400 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 planted........................................... 14,000 0. 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 (1) canceled after 10 months............. 1,400 Instructions 1. Assign each payment and receipt to Land (unlimited life), Land Improvements (limited life), Building, or Other Accounts. Indicate receipts by an asterisk. Identify each item by letter and list the amounts in columnar form, as follows: Item Land Land Improvements Building Other Accounts 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 (0)] 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.
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