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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 | $ 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
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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Chapter 10 Solutions
Accounting
- 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) 55,000 c. Delinquent real estate taxes on property, assumed by purchaser 15,000 d. Cost of razing and removing building acquired in (b) 4,000 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 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 12,000 j. Money borrowed to pay building contractor 800,000 * k. Cost of repairing windstorm damage during construction 5,000 I. Cost of paving parking…arrow_forwardAllocating 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…arrow_forwardThe 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 $3,200 b. Cost of real estate acquired as a plant site: Land 340,700 Building (to be demolished) 32,400 c. Delinquent real estate taxes on property, assumed by purchaser 19,200 d. Cost of tearing down and removing building acquired in (b) 5,400 e. Proceeds from sale of salvage materials from old building 3,200* f. Special assessment paid to city for extension of water main to the property 12,800 g. Architect’s and engineer’s fees for plans and supervision 46,800 h. Premium on one-year insurance policy during construction 4,500 i. Cost of filling and grading land 18,700 j. Money borrowed to pay building contractor 798,900* k. Cost of repairing windstorm damage during…arrow_forward
- 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…arrow_forwardThe 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…arrow_forwardAcquisition Cost of Long-Lived Assets The following items represent expenditures (or receipts) related to the construction of a new home office for Norma Company. Cost of land site (which included an old apartment building appraised at 75,000). Legal fees, including fee for title search Payment of apartment building mortgage and related interest due at time of sale Payment for delinquent property taxes assumed by the purchaser Cost of razing the apartment building Proceeds from sale of salvaged materials Grading to establish proper drainage flow on land site Architect's fees on new building Proceeds from sales of excess dirt (from basement excavation) to owner of adjoining property (dirt was used to fill in a low area on property) Payment to building contractor Payment of medical bills of employee accidentally injured while inspecting building construction Special assessment for paving city sidewalks (paid to city) Cost of paving driveway and parking lot Cost of installing lights in…arrow_forward
- eBook 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 $3,100 b. Cost of real estate acquired as a plant site: Land 326,200 Building (to be demolished) 31,000 C. Delinquent real estate taxes on property, assumed by purchaser 18,400 d. Cost of tearing down and removing building acquired in (b) 5,100 Proceeds from sale of salvage materials from old building 3,100* e. f. Special assessment paid to city for extension of water main to the property 12,200 g. Architect's and engineer's fees for plans and supervision 44,900 h. Premium on one-year insurance policy during construction 4,300 L. Cost of filling and grading land 17,900 Money borrowed to pay building contractor 765,000* k. Cost of repairing windstorm damage during construction 5,600 I. Cost of paving…arrow_forwardPayment of delinquent property taxes assumed Facetious Company incurred the following expenditures Payment of land mortgage and related Purchase price of land and an old apartment building related to the construction of a new home office: 3. What is the cost of land improvement? Cost of razing the apartment building Legal fees, including fee for title search Interest cost on specific borrowing during construction Payment of medical bills of employees accidentally 2,000,000 1,800,000 10,000 Fair value of land interest due at time of sale Grading and drainage on land site Architect fee on new building Payment to building contractor 50,000 20,000 30,000 15,000 200,000 8,000,000 300,000 injured while inspecting building construction Cost of paving driveway and parking lot Cost of trees, shrubs and other landscaping Cost of installing lights in parking lot Premium for insurance on building during construction Cost of open house party to celebrate opening of building 10,000 40,000 55,000…arrow_forwardDetermining Ending Balances in Land and Building Accounts Maldive Company completes the construction of a building. The following separate items are the costs relevant to the purchase of the lot and construction of the building. Cash payments to contractor Costs of constructing foundation Cost of land (building site) Gross cost to raze old building on land Proceeds from old building salvage Utility charges for electricity used in construction Capitalized interest on construction $80,000 2,400 40,000 16,000 Check 4,000 1,600 2,400 Determine the ending balance for (1) the Land account and for (2) the Building account. Ending balance in the Land account $ 40,000 * Ending balance in the Building account $ 102,800 *arrow_forward
- What is the cost of the land, based upon the following data? Land purchase price $184,675 Broker's commission 18,496 Payment for the demolition and removal of existing building 4,906 Cash received from the sale of materials salvaged from the demolished building 2,414 $arrow_forwardWhat is the cost of the land, based upon the following data? Land purchase price $179,980 Broker's commission 15,546 Payment for the demolition and removal of existing building 3,928 Cash received from the sale of materials salvaged from the demolished building 2,519 $fill in the blank 1arrow_forwardMerchant Company purchased land for a building site. The costs associated with the property were: Purchase price Real estate commissions Legal fees Expenses of clearing the land What is the total recorded cost of the land? $ 184,000 15,900 1,700 2,900arrow_forward
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