The Buildings account of Postera Inc. includes the following items that were used in determining the basis for depreciating the cost of a building. a. Organization and promotion expenses. b. Architect’s fees. c. Interest and taxes during construction. d. Interest revenue on investments held to fund construction of a building. Do you agree with these charges? If not, how would you deal with each of the items above in the corporation’s books and in its annual financial statements?

The Buildings account of Postera Inc. includes the following items that were used in determining the basis for depreciating the cost of a building. a. Organization and promotion expenses. b. Architect’s fees. c. Interest and taxes during construction. d. Interest revenue on investments held to fund construction of a building. Do you agree with these charges? If not, how would you deal with each of the items above in the corporation’s books and in its annual financial statements?

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter11: Long-term Assets

Section: Chapter Questions

Problem 3PB: During the current year, Alanna Co. had the following transactions pertaining to its new office...

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During the current year, Alanna Co. had the following transactions pertaining to its new office building. A. What should Alanna Co. record on its books for the land? The total cost of land includes all costs of preparing the land for use. The demolition cost of the old building is added to the land costs, and the sale of the old building scrap is subtracted from the land cost. B. What should Alanna Co. record on its books for the building?
The IRS rule for capitalizing a purchase is if it is over $2,500. But this is not necessarily the guideline a company wants to establish. Capital assets are recorded in a “capital asset ledger” with the date of purchase, cost, depreciation method, useful life, salvage value and accumulated depreciation. Think of how a staff accountant, would write policy for a company in what type of expenditures should be capitalized and depreciated versus expensed. . Does it matter what type of company it is? How would this policy affect the balance sheet and the fixed asset ratio?
Indicate where the following items would be shown on abalance sheet.(a) A lien that was attached to the land when purchased.(b) Landscaping costs.(c) Attorney’s fees and recording fees related to purchasingland.(d) Variable overhead related to construction of machinery.(e) A parking lot servicing employees in the building.(f) Cost of temporary building for workers during constructionof building.(g) Interest expense on bonds payable incurred duringconstruction of a building.(h) Assessments for sidewalks that are maintained bythe city.(i) The cost of demolishing an old building that was onthe land when purchased.
2. If a corporation purchases land and building and subsequently tears down the building and uses the property as a parking lot, the proper accounting treatment of the cost of the building would depend on A) the intention of management for the property when the building was acquired. B) the significance of the cost allocated to the building in relation to the combined cost of the land and building. C) the length of time for which the building was held prior to its demolition. D) the contemplated future use of the parking lot.
The following would be non-deductible capital expenditure: (a.) The investment banker fees incurred in a hostile take-over (b.) The cost of fixing a leaky copper pipe in an office building. (c.) The cost of removing asbestos and re-insulating an entire office building (d.) The cost of paper supplies used in a law office.
Which of the following items should be accounted for as a capital expenditure?a. The monthly rental cost of an office buildingb. Costs incurred to repair leaks in a building’s roofc. Maintenance fees paid with funds provided by the company’s capitald. Taxes paid in conjunction with the purchase of office equipment
When an entity acquires land with a building on it and immediately tears down the building so that the land can be used for the construction of a plant, the cost incurred to tear down the building shall be a. Expensed as incurred b. Amortized over the estimated time period between the tearing down of the building and the completion of the plant c. Added to the cost of the building d. Added to the cost of the land
All of the following costs associated with acquiring a building should be capitalized except a. The costs of buildings permits b. The cost of a strike associated with the construction of the building c. the contract price d. the costs of excavation for the building
Sarasota Supply Company, a newly formed corporation, incurred the following expenditures related to Land, to Buildings, and to Machinery and Equipment. Abstract company’s fee for title search $1,118 Architect’s fees 6,816 Cash paid for land and dilapidated building thereon 187,050 Removal of old building $43,000 Less: Salvage 11,825 31,175 Interest on short-term loans during construction 15,910 Excavation before construction for basement 40,850 Machinery purchased (subject to 2% cash discount, which was not taken) 118,250 Freight on machinery purchased 2,881 Storage charges on machinery, necessitated by noncompletion of building when machinery was delivered 4,687 New building constructed (building construction took 6 months from date of purchase of land and old building) 1,042,750 Assessment by city for drainage project 3,440 Hauling charges for delivery of…
What do you know about PPE ( property, plant and equipment ? • What range of measures is used to determine amounts for these items in the reports of the individual companies? • Do you think it is valid to add the items, given the measures used? • How would you interpret the total amount for property, plant and equipment in the financial statements? • Compare the measures used by the different companies for similar items. Are there any inconsistencies in how similar items are measured by the different companies? Answer above by seeing 2020 annual report of Coles & WoolWorths AU and evaluate the PPE disclosure of WOW and COL.
When an entity purchases land with a building on it and immediately tears down the building so that the land can be used for the construction of a plant, the cost incurred to tear down the building shall be Expensed as incurred Amortized over the estimated time period between the tearing down of the building and the completion of the plant Added to the cost of the land Added to the cost of the plant
C & M Securities made several expenditures during the current fiscal year, including the following:(a)For each of the items listed below, indicate whether the cost should be debited to land, buildings, equipment, land improvements, or an expense account. Amount Description of Expenditure 1. $150,000 Acquisition of a piece of land to be used as a building site No effectEquipmentBuildingExpense or Land improvementsLandExpenseExpense or BuildingsLand improvements 2. 3,000 Demolition of a small building on the land, to make way for the new building Expense or BuildingsNo effectLand improvementsBuildingExpenseEquipmentLandExpense or Land improvements 3. 7,500 Levelling of the land to prepare it for construction of the new building No effectLand improvementsExpense or Land…