(Learning Objectives 1, 2, 3: Measure and account for plant assets; distinguish acapital expenditure from an expense; measure and record depreciation) Becker Supply, Inc.,opened an office in White Bear Lake, Minnesota. Becker incurred the following costs in acquiring land, making land improvements, and constructing and furnishing the new sales building:LO 1, 2, 3a. Purchase price of land, including an old building that will be usedfor a garage (land market value is $310,000; building marketvalue is $90,000)..................................................................................... $340,000b. Grading (leveling) land............................................................................ 8,800c. Fence around the land............................................................................. 31,400d. Attorney fee for title search on the land .................................................. 1,100e. Delinquent real estate taxes on the land to be paid by Becker Supply...... 5,800f. Company signs at entrance to the property ............................................. 1,900g. Building permit for the sales building...................................................... 700h. Architect fee for the design of the sales building...................................... 87,800i. Masonry, carpentry, and roofing of the sales building............................. 518,000j.k.l.m.n.o.Renovation of the garage building........................................................... 37,100Interest cost on construction loan for sales building................................ 9,900Landscaping (trees and shrubs) ............................................................... 6,100Parking lot and concrete walks on the property ...................................... 52,200Lights for the parking lot and walkways................................................. 7,500Salary of construction supervisor (84% to sales building; 10%to land improvements; and 6% to garage building renovations)..............p.q.40,000Oce furniture for the sales building ...................................................... 79,000Transportation and installation of furniture............................................ 1,000The company depreciates buildings over 30 years, land improvements over 15 years, andfurniture over 12 years, all on a straight-line basis with residual values of zero.Requirements1. Identify the proper account (Land, Land Improvements, Sales Building, Garage Building, orFurniture) for each of the costs listed in the problem. Calculate the total cost of each asset.2. All construction was complete and the assets were placed in service on April 2. Recorddepreciation for the year ended December 31. Round to the nearest dollar.3. Why would a manager need to understand the concepts covered in this problem?
(Learning Objectives 1, 2, 3: Measure and account for plant assets; distinguish a
capital expenditure from an expense; measure and record
opened an office in White Bear Lake, Minnesota. Becker incurred the following costs in acquiring land, making land improvements, and constructing and furnishing the new sales building:
LO 1, 2, 3
a. Purchase price of land, including an old building that will be used
for a garage (land market value is $310,000; building market
value is $90,000)..................................................................................... $340,000
b. Grading (leveling) land............................................................................ 8,800
c. Fence around the land............................................................................. 31,400
d. Attorney fee for title search on the land .................................................. 1,100
e. Delinquent real estate taxes on the land to be paid by Becker Supply...... 5,800
f. Company signs at entrance to the property ............................................. 1,900
g. Building permit for the sales building...................................................... 700
h. Architect fee for the design of the sales building...................................... 87,800
i. Masonry, carpentry, and roofing of the sales building............................. 518,000
j.
k.
l.
m.
n.
o.
Renovation of the garage building........................................................... 37,100
Interest cost on construction loan for sales building................................ 9,900
Landscaping (trees and shrubs) ............................................................... 6,100
Parking lot and concrete walks on the property ...................................... 52,200
Lights for the parking lot and walkways................................................. 7,500
Salary of construction supervisor (84% to sales building; 10%
to land improvements; and 6% to garage building renovations)..............
p.
q.
40,000
Oce furniture for the sales building ...................................................... 79,000
Transportation and installation of furniture............................................ 1,000
The company depreciates buildings over 30 years, land improvements over 15 years, and
furniture over 12 years, all on a straight-line basis with residual values of zero.
Requirements
1. Identify the proper account (Land, Land Improvements, Sales Building, Garage Building, or
Furniture) for each of the costs listed in the problem. Calculate the total cost of each asset.
2. All construction was complete and the assets were placed in service on April 2. Record
depreciation for the year ended December 31. Round to the nearest dollar.
3. Why would a manager need to understand the concepts covered in this problem?
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