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

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Topic Video
Question
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 Building.
Question not attempted.
Allocation to Fixed Asset Accounts
Land
1
Item
Land
Building
Other Accounts
Improvements
b.
d.
e.
f.
9.
h.
i.
j.
k
L.
54
m.
15
n.
0.
17
p.
4.
20
5.
21
Debited amounts
Transcribed Image Text:Question not attempted. Allocation to Fixed Asset Accounts Land 1 Item Land Building Other Accounts Improvements b. d. e. f. 9. h. i. j. k L. 54 m. 15 n. 0. 17 p. 4. 20 5. 21 Debited amounts
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Depreciation Accounting
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education