Allocating 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 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 shruberry 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 comapny for windstorm and vandalism damage.............. 7,500* Q. Payement 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* Instructions1. Assign each payment and receipt to Land (unlimited life), Land Improvements(limited life), Building, or Other Accounts. Indicate receipts by an asterisk. Identify eachitem by letter and list the amounts in columnar form, as follows: Item Land Land Improvements Building Other Accounts 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 arc depreciated overa 20-year life using the double-declining-balance method.

Allocating 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 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 shruberry 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 comapny for windstorm and vandalism damage.............. 7,500* Q. Payement 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* Instructions1. Assign each payment and receipt to Land (unlimited life), Land Improvements(limited life), Building, or Other Accounts. Indicate receipts by an asterisk. Identify eachitem by letter and list the amounts in columnar form, as follows: Item Land Land Improvements Building Other Accounts 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 arc depreciated overa 20-year life using the double-declining-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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Question

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 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 shruberry 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 comapny for windstorm and vandalism damage..............	7,500*
Q.	Payement 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*

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:

Item

Land

Land Improvements

Building

Other Accounts

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 arc depreciated over
a 20-year life using the double-declining-balance method.

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