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 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 290,000 Building (to be demolished) 60,000 c. Delinquent real estate taxes on property, assumed by purchaser 16,000 d. Cost of razing and removing building acquired in (b) 4,000 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 28,000 g. Architect’s and engineer’s fees for plans and supervision 70,000 h. Premium on one-year insurance policy during construction 5,000 i. Cost of filling and grading land 13,000 j. Money borrowed to pay building contractor 1,000,000 * k. Cost of repairing windstorm damage during construction 5,000 l. Cost of paving parking lot to be used by customers 33,000 m. Cost of trees and shrubbery planted 11,000 n. Cost of floodlights installed on parking lot 1,000 o. Cost of repairing vandalism damage during construction 3,000 p. Proceeds from insurance company for windstorm and vandalism damage 7,000 * q. Payment to building contractor for new building 700,000 r. Interest incurred on building loan during construction 35,000 s. Refund of premium on insurance policy (h) canceled after 11 months 600 * Required: 1. Assign each payment and receipt to Land (unlimited life), Land Improvements (limited life), Building, or Other Accounts. Choose the correct account from the dropdown list for each letter and enter the appropriate amount. Enter receipts as negative amounts using the minus sign. Item Account Amount a. $ b. $ c. $ d. $ e. $ f. $ g. $ h. $ i. $ j. $ k. $ l. $ m. $ n. $ o. $ p. $ q. $ r. $ s. $ 2. Determine the amount debited to Land, Land Improvements, and Building. Land Land Improvements Building $ $ $ 3. Land used as a plant site lose its ability to provide services; thus, it depreciated. However, land improvements lose their ability to provide services as time passes and are, therefore, . 4. What would be the effect on the income statement and balance sheet if the cost of filling and grading land of $13,000 [payment (i)] was incorrectly classified as Land Improvements rather than Land? Assume Land Improvements are depreciated over a 20-year life using the doubledeclining- balance method.

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 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 290,000 Building (to be demolished) 60,000 c. Delinquent real estate taxes on property, assumed by purchaser 16,000 d. Cost of razing and removing building acquired in (b) 4,000 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 28,000 g. Architect’s and engineer’s fees for plans and supervision 70,000 h. Premium on one-year insurance policy during construction 5,000 i. Cost of filling and grading land 13,000 j. Money borrowed to pay building contractor 1,000,000 * k. Cost of repairing windstorm damage during construction 5,000 l. Cost of paving parking lot to be used by customers 33,000 m. Cost of trees and shrubbery planted 11,000 n. Cost of floodlights installed on parking lot 1,000 o. Cost of repairing vandalism damage during construction 3,000 p. Proceeds from insurance company for windstorm and vandalism damage 7,000 * q. Payment to building contractor for new building 700,000 r. Interest incurred on building loan during construction 35,000 s. Refund of premium on insurance policy (h) canceled after 11 months 600 * Required: 1. Assign each payment and receipt to Land (unlimited life), Land Improvements (limited life), Building, or Other Accounts. Choose the correct account from the dropdown list for each letter and enter the appropriate amount. Enter receipts as negative amounts using the minus sign. Item Account Amount a. $ b. $ c. $ d. $ e. $ f. $ g. $ h. $ i. $ j. $ k. $ l. $ m. $ n. $ o. $ p. $ q. $ r. $ s. $ 2. Determine the amount debited to Land, Land Improvements, and Building. Land Land Improvements Building $ $ $ 3. Land used as a plant site lose its ability to provide services; thus, it depreciated. However, land improvements lose their ability to provide services as time passes and are, therefore, . 4. What would be the effect on the income statement and balance sheet if the cost of filling and grading land of $13,000 [payment (i)] was incorrectly classified as Land Improvements rather than Land? Assume Land Improvements are depreciated over a 20-year life using the doubledeclining- balance method.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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 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	290,000
	Building (to be demolished)	60,000
c.	Delinquent real estate taxes on property, assumed by purchaser	16,000
d.	Cost of razing and removing building acquired in (b)	4,000
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	28,000
g.	Architect’s and engineer’s fees for plans and supervision	70,000
h.	Premium on one-year insurance policy during construction	5,000
i.	Cost of filling and grading land	13,000
j.	Money borrowed to pay building contractor	1,000,000	*
k.	Cost of repairing windstorm damage during construction	5,000
l.	Cost of paving parking lot to be used by customers	33,000
m.	Cost of trees and shrubbery planted	11,000
n.	Cost of floodlights installed on parking lot	1,000
o.	Cost of repairing vandalism damage during construction	3,000
p.	Proceeds from insurance company for windstorm and vandalism damage	7,000	*
q.	Payment to building contractor for new building	700,000
r.	Interest incurred on building loan during construction	35,000
s.	Refund of premium on insurance policy (h) canceled after 11 months	600	*

Required:

1. Assign each payment and receipt to Land (unlimited life), Land Improvements (limited life), Building, or Other Accounts. Choose the correct account from the dropdown list for each letter and enter the appropriate amount. Enter receipts as negative amounts using the minus sign.

Item	Account	Amount
a.		$
b.		$
c.		$
d.		$
e.		$
f.		$
g.		$
h.		$
i.		$
j.		$
k.		$
l.		$
m.		$
n.		$
o.		$
p.		$
q.		$
r.		$
s.		$

2. Determine the amount debited to Land, Land Improvements, and Building.

Land	Land Improvements	Building
$	$	$

3. Land used as a plant site lose its ability to provide services; thus, it depreciated. However, land improvements lose their ability to provide services as time passes and are, therefore, .

4. What would be the effect on the income statement and balance sheet if the cost of filling and grading land of $13,000 [payment (i)] was incorrectly classified as Land Improvements rather than Land? Assume Land Improvements are depreciated over a 20-year life using the doubledeclining- balance method.

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