Allocate 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.
Instructions
Determine the increases to Land, Lind Improvements. and Building.
Concept Introduction:
Capital Expenditures are that type of expenses which a company incurs on its tangible or fixed assets in regard to either its purchase or for its repairs or installation. These assets are those which are used for more than one year i.e. which are not held for sale. These expenditures are like purchase of land, building, equipment, repairs or improvement in the building or machinery, etc. These expenses are meant for capitalization in the balance sheet in the respective fixed assets.
The net increase in the value of land, land improvement, and building
Answer to Problem 7.1.2P
The increase in the value of land, land improvement, and building is
Explanation of Solution
Transaction no. | Transaction | Land | Land improvements | Buildings | Other accounts |
a. | Architect and engineer fees | | |||
b. | Cost of filing and grading land | | |||
c. | Cost of removing the building | | |||
d. | Cost of paving parking lot | | |||
e. | Cost of real estate acquired as plant site | | |||
f. | Cost of repairing windstorm damage | | |||
g. | Cost of repairing vandalism damage | | |||
h. | Cost of trees and shrubbery | | |||
i. | Delinquent real estate taxes on property | | |||
j. | Fee paid to attorney for title | | |||
k. | Finder's fee paid to real estate agency | | |||
l. | Interest incurred on building loan | | |||
m. | Money borrowed to pay building contractor | | |||
n. | Payment to contractor for new building | | |||
o. | Proceeds from insurance windstorm and vandalism | | |||
p. | Premium on one-year insurance policy | | |||
q. | Proceeds from sale of salvage materials | | |||
r. | Refund of premium on insurance policy in | | |||
s. | Special assessment paid to city for extension of water | | |||
Total | | | | |
As per the assignment transactions, the net increase in the values of land, land improvement, and building are:
Transaction no. | Transaction | Land | Land improvements | Buildings | Other accounts |
Total | | | | |
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Chapter 7 Solutions
SURVEY OF ACCOUNTING
- 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. 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: 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 current years 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 that Land Improvements are depreciated over a 20-year life using the double-declining-balance method.arrow_forwardAllocating 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 ceramic business. The receipts are identified by an asterisk. a. Fee paid to attorney for title search $3,000 b. Cost of real estate acquired as a plant site: Land 280,000 Building (to be demolished) 55,000 c. Delinquent real estate taxes on property, assumed by purchaser 16,000 d. Cost of razing and removing building acquired in (b) 5,000 e. Proceeds from sale of salvage materials from old building 5,000 * f. Special assessment paid to city for extension of water main to the property 28,000 g. Architect’s and engineer’s fees for plans and supervision 70,000 h. Premium on one-year insurance policy during construction 7,000 i. Cost of filling and grading land 11,000 j. Money borrowed to pay building…arrow_forwardAllocating payments and receipts to fixed asset accountsThe 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. A. Fee paid to attorney for title search.............. $2,500 B. Cost of real estate acquired as a plant site: Land 285,000 C. Delonquent 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 contactor....... 900,000* K. Cost of…arrow_forward
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