The following cases are independent. Case A  Starling Ltd. bought a building for $1,270,000. Before using the building, the following expenditures were made:         Repair and renovation of building $ 120,000 Construction of new paved driveway   28,700 Upgraded landscaping   5,200 Wiring   17,300 Deposits with utilities for connections   3,000 Sign for front and back of building, attached to roof   13,700 Installation of fence around property   16,700     Case B  Lark Company purchased a $33,700 tract of land for a new manufacturing facility. Lark demolished an old building on the property and sold the materials it salvaged from the demolition. Lark incurred additional costs and realized salvage proceeds as follows:         Demolition of old building $ 32,800 Routine maintenance (mowing) done on purchase   3,000 Proceeds from sale of salvaged materials   14,450 Legal fees   9,400 Title guarantee insurance   7,100   Required: 1. What balance would Starling report in the building account? 2. What balance should Lark report in the land account? What balance should Starling report in the Land improvements account?

CONCEPTS IN FED.TAX.,2020-W/ACCESS
20th Edition
ISBN:9780357110362
Author:Murphy
Publisher:Murphy
Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization
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The following cases are independent.

Case A  Starling Ltd. bought a building for $1,270,000. Before using the building, the following expenditures were made:

 

     
Repair and renovation of building $ 120,000
Construction of new paved driveway   28,700
Upgraded landscaping   5,200
Wiring   17,300
Deposits with utilities for connections   3,000
Sign for front and back of building, attached to roof   13,700
Installation of fence around property   16,700
 

 

Case B  Lark Company purchased a $33,700 tract of land for a new manufacturing facility. Lark demolished an old building on the property and sold the materials it salvaged from the demolition. Lark incurred additional costs and realized salvage proceeds as follows:

 

     
Demolition of old building $ 32,800
Routine maintenance (mowing) done on purchase   3,000
Proceeds from sale of salvaged materials   14,450
Legal fees   9,400
Title guarantee insurance   7,100
 


Required: 1. What balance would Starling report in the building account?

2. What balance should Lark report in the land account? What balance should Starling report in the Land improvements account?

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