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 $ 2,500 b. Cost of real estate acquired as a plant site: Land 285,000 Cost of real estate acquired as a plant site: Building (to be demolished) 55,000 c. Delinquent real estate taxes on property, assumed by purchaser 15,500 d. Cost of razing and removing building acquired in B 5,000 e.* Proceeds from sale of salvage materials from old building 4,000 f. Special assessment paid to city for extension of water main to the property 29,000 g. Architect’s and engineer’s fees for plans and supervision 60,000 h. Premium on one-year insurance policy during construction 6,000 i. Cost of filling and grading land 12,000 j.* Money borrowed to pay building contractor 900,000 k. Cost of repairing windstorm damage during construction 5,500 l. Cost of paving parking lot to be used by customers 32,000 m. Cost of trees and shrubbery planted 11,000 n. Cost of floodlights installed on parking lot 2,000 o. Cost of repairing vandalism damage during construction 2,500 p.* Proceeds from insurance company for windstorm and vandalism damage 7,500 q. Payment to building contractor for new building 800,000 r. Interest incurred on building loan during construction 34,500 s.* Refund of premium on insurance policy (h) canceled after 11 months 500 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 $12,000 [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. 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 Buildi
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 $ 2,500 b. Cost of real estate acquired as a plant site: Land 285,000 Cost of real estate acquired as a plant site: Building (to be demolished) 55,000 c. Delinquent real estate taxes on property, assumed by purchaser 15,500 d. Cost of razing and removing building acquired in B 5,000 e.* Proceeds from sale of salvage materials from old building 4,000 f. Special assessment paid to city for extension of water main to the property 29,000 g. Architect’s and engineer’s fees for plans and supervision 60,000 h. Premium on one-year insurance policy during construction 6,000 i. Cost of filling and grading land 12,000 j.* Money borrowed to pay building contractor 900,000 k. Cost of repairing windstorm damage during construction 5,500 l. Cost of paving parking lot to be used by customers 32,000 m. Cost of trees and shrubbery planted 11,000 n. Cost of floodlights installed on parking lot 2,000 o. Cost of repairing vandalism damage during construction 2,500 p.* Proceeds from insurance company for windstorm and vandalism damage 7,500 q. Payment to building contractor for new building 800,000 r. Interest incurred on building loan during construction 34,500 s.* Refund of premium on insurance policy (h) canceled after 11 months 500 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 $12,000 [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. 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 Buildi
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter12: Intangibles
Section: Chapter Questions
Problem 9MC
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Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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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 by an asterisk next to the item letter.
a. | Fee paid to attorney for title search | $ 2,500 |
b. | Cost of real estate acquired as a plant site: Land | 285,000 |
Cost of real estate acquired as a plant site: Building (to be demolished) | 55,000 | |
c. | Delinquent real estate taxes on property, assumed by purchaser | 15,500 |
d. | Cost of razing and removing building acquired in B | 5,000 |
e.* | Proceeds from sale of salvage materials from old building | 4,000 |
f. | Special assessment paid to city for extension of water main to the property | 29,000 |
g. | Architect’s and engineer’s fees for plans and supervision | 60,000 |
h. | Premium on one-year insurance policy during construction | 6,000 |
i. | Cost of filling and grading land | 12,000 |
j.* | Money borrowed to pay building contractor | 900,000 |
k. | Cost of repairing windstorm damage during construction | 5,500 |
l. | Cost of paving parking lot to be used by customers | 32,000 |
m. | Cost of trees and shrubbery planted | 11,000 |
n. | Cost of floodlights installed on parking lot | 2,000 |
o. | Cost of repairing vandalism damage during construction | 2,500 |
p.* | Proceeds from insurance company for windstorm and vandalism damage | 7,500 |
q. | Payment to building contractor for new building | 800,000 |
r. | Interest incurred on building loan during construction | 34,500 |
s.* | Refund of premium on insurance policy (h) canceled after 11 months | 500 |
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 |
4. | What would be the effect on the income statement and balance sheet if the cost of filling and grading land of $12,000 [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. |
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. |
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