Accounting
Accounting
27th Edition
ISBN: 9781337272094
Author: WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher: Cengage Learning,
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Chapter 10, Problem 10.1APR

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 $ 2,500
b. Cost of real estate acquired as a plant site: Land 285,000
Building (to be demolished) 55,000
c. Delinquent real estate taxes on property, assumed by purchaser 15,500
d. Cost of tearing down 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
1. 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*

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 current year’s 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.

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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 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…
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 $2,000   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 15,000   d. Cost of razing and removing building acquired in (b) 5,000   e. Proceeds from sale of salvage materials from old building 3,000 *   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 7,000   i. Cost of filling and grading land 13,000   j. Money borrowed to pay building…
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…

Chapter 10 Solutions

Accounting

Ch. 10 - Straight-line depreciation A building acquired at...Ch. 10 - Straight-line depreciation Equipment acquired at...Ch. 10 - Units-of-activity depreciation A truck acquired at...Ch. 10 - Units-of-activity depreciation A tractor acquired...Ch. 10 - Double declining-balance depreciation A building...Ch. 10 - Double-declining-balance depreciation Equipment...Ch. 10 - Revision of depreciation Equipment with a cost of...Ch. 10 - Revision of depreciation A truck with a cost of...Ch. 10 - Capital and revenue expenditures On February 14,...Ch. 10 - Capital and revenue expenditures On August 7,...Ch. 10 - Sale of equipment Equipment was acquired at the...Ch. 10 - Sale of equipment Equipment was acquired at the...Ch. 10 - Prob. 10.7APECh. 10 - Prob. 10.7BPECh. 10 - Prob. 10.8APECh. 10 - Prob. 10.8BPECh. 10 - Fixed asset turnover ratio Financial statement...Ch. 10 - Fixed asset turnover ratio Financial statement...Ch. 10 - Costs of acquiring fixed assets Melinda Stoffers...Ch. 10 - Prob. 10.2EXCh. 10 - Prob. 10.3EXCh. 10 - Nature of depreciation Tri-City Ironworks Co....Ch. 10 - Straight-line depreciation rates Convert each of...Ch. 10 - Straight-line depreciation A refrigerator used by...Ch. 10 - Depreciation by units-of-activity method A...Ch. 10 - Depreciation by units-of-activity method Prior to...Ch. 10 - Depreciation by two methods A Kubota tractor...Ch. 10 - Depreciation by two methods A storage tank...Ch. 10 - Partial-year depreciation Equipment acquired at a...Ch. 10 - Revision of depreciation A building with a cost of...Ch. 10 - Capital and revenue expenditures US Freight Lines...Ch. 10 - Prob. 10.14EXCh. 10 - Capital and revenue expenditures Quality Move...Ch. 10 - Capital expenditure and depreciation; parital-year...Ch. 10 - Entries for sale of fixed asset Equipment acquired...Ch. 10 - Disposal of fixed asset Equipment acquired on...Ch. 10 - Prob. 10.19EXCh. 10 - Amortization entries Kleen Company acquired patent...Ch. 10 - Book value of fixed assets Apple Inc. designs,...Ch. 10 - Balance sheet presentation List the errors you...Ch. 10 - Fixed asset turnover ratio Amazon.com, Inc. is the...Ch. 10 - Fixed asset turnover ratio Verizon Communications...Ch. 10 - Fixed asset turnover ratio FedEx Corporation and...Ch. 10 - Fixed asset turnover ratio The following table...Ch. 10 - Asset traded for similar asset A printing press...Ch. 10 - Prob. 10.28EXCh. 10 - Entries for trade of fixed asset On July 1, Twin...Ch. 10 - Entries for trade of fixed asset On October 1,...Ch. 10 - Allocating payments and receipts to fixed asset...Ch. 10 - Comparing three depreciation methods Dexter...Ch. 10 - Depreciation by three methods; partial years...Ch. 10 - Depreciation by two methods; sale of fixed asset...Ch. 10 - Transactions for fixed assets, including sale The...Ch. 10 - Amortization and depletion entries Data related to...Ch. 10 - Allocating payments and receipts to fixed asset...Ch. 10 - Comparing three depreciation methods Waylander...Ch. 10 - Depreciation by three methods; partial years...Ch. 10 - Depreciation by two methods; sale of fixed asset...Ch. 10 - Transactions for fixed assets, including sale The...Ch. 10 - Amortization and depletion entries Data related to...Ch. 10 - Ethics in Action Hard Bodies Co. is a fitness...Ch. 10 - Prob. 10.2CPCh. 10 - Communication Godwin Co. owns three delivery...Ch. 10 - Prob. 10.6CP
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